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9780521517423 Yock, Zenios & Makower PPC C M Y K

SECOND EDITION

MAKOWER
ZENIOS
YOCK
A practical guide to the new era of global opportunity [ENDORSEMENT QUOTE ]

BIODESIGN
Placement text only for
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students, researchers, and entrepreneurs through a proven process for the omnis rempori atessit The Process of Innovating Medical Technologies

BIODESIGN
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• Nearly 70 case studies on innovative products from around the world

explore successes and failures, provide practical advice, and enable
nonsectem.
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readers to learn from real projects. BRINTON, KUMAR, WATKINS, DENEND
• End-of-chapter ‘Getting Started’ sections encourage readers to take Ut officae dolupta ssequatus
action and apply what they’ve learned to their own work. mil inctorita doluptur,
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• A collection of nearly 100 videos, created for the second edition of the
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book, expand upon critical concepts, demonstrate essential activities
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within the process, and bring the innovation experience to life.
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• A wealth of additional material supports the book, including active links oremodiat latia dus, offici
to external websites and resources, supplementary appendices, and auditat emporem la qui di
timely updates. corum harunt occusandis
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Readers can access videos

and additional materials quickly,
easily, and at the most relevant
point in the text within the ebook,
or on the companion website at
ebiodesign.org, alongside
instructor resources.
Designed by Zoe Naylor
BIODESIGN
The Process of Innovating Medical Technologies
A practical guide to the new era of global opportunity and value-based innovation in
medical technology

This step-by-step guide to medical technology innovation, now in full color, has been
rewritten to reflect recent trends of industry globalization and value-conscious health-
care. Written by a team of medical, engineering, and business experts, the authors
provide a comprehensive resource that leads students, researchers, and entrepreneurs
through a proven process for the identification, invention, and implementation of new
solutions.
• Nearly 70 case studies on innovative products from around the world explore
successes and failures, provide practical advice, and enable readers to learn from
real projects.
• “Getting Started” sections for each chapter encourage readers to take action and
apply what they’ve learned to their own work.
• A collection of nearly 300 videos, created for the second edition of the book,
expand upon critical concepts, demonstrate essential activities within the process,
and bring the innovation experience to life.
• A wealth of additional material supports the book, including active links to external
websites and resources, supplementary appendices, and timely updates.
• New to this edition, two opening sections highlight the importance of globalization
and cost-effective healthcare in the medtech industry, themes which are carried
throughout the book.
Readers can access videos and additional materials quickly, easily, and at the most
relevant point in the text within the ebook, or on the companion website at ebiodesign.org,
alongside instructor resources.
“Biodesign is on the forward edge of one of the most “If you want to know how to come up with a both
exciting new frontiers of healthcare. This impressive and innovative and transformative technology in medicine,
engaging work provides a thorough look at the innova- there isn’t a better resource than this book by Paul Yock
tion process. But this is certainly not just for the scientific and his colleagues at Biodesign. Over 13 years ago, the
innovators: it is a must-read for anyone in any aspect of program at Stanford brought together trans-disciplinary
healthcare today.” innovators – engineers, physicians and business experts –
Alex Gorsky, Chairman and CEO, Johnson & Johnson to not only design their formidable program, but to teach
all the rest of us how to do it.”
“I can’t think of a more important place to turn creati- Eric J. Topol, Director, Scripps Translational Science
vity loose than in designing the future of healthcare. Institute
But it’s a complicated scene – and it’s easy to get lost
in the maze of stakeholders, regulation, and financing. “this book on biodesign will be invaluable for any inven-
Biodesign lays out a clear and logical map to find and tor or entrepreneur. It contains very useful information on
pursue opportunities for real innovation. One of the such critical areas as design principles, regulatory issues,
core messages in this new edition is that, by placing clinical trial strategies, intellectual property, reimburse-
the need for affordability up front in design process, ment strategies, and funding- and it backs them up with
innovators can more explicitly create technologies that interesting real-life experiences and case studies”.
bring value to the healthcare system. This is design Robert Langer, David H. Koch Institute Professor, MIT
thinking at its best!”
David Kelley, Founder, Hasso Plattner Institute of Design “This practical but comprehensive resource is keeping up
at Stanford University, Founder, IDEO with the rapid developments affecting medical device
innovation. The authors draw on their own extensive
“A must-to-read textbook for anyone in academia or experiences and insights, as well as diverse case studies,
industry, in any country, who wants to innovate and to present the full range of strategic and operational
deliver value to patients and health systems around considerations to bring valuable new therapies to
the world.” patients in the US and around the world.”
Koji Nakao, Chairman of Terumo and the Japanese Mark McClellan, Director, Health Care Innovation and
Federation of Medical Device Associations Value Initiative, Brookings Institution
BIODESIGN
The Process of Innovating Medical Technologies

EDITORS
Paul G. Yock
Stefanos Zenios
Josh Makower
Todd J. Brinton
Uday N. Kumar
F. T. Jay Watkins

PRINCIPAL WRITER
Lyn Denend
SPECIALTY EDITOR
Thomas M. Krummel
WEB EDITOR
Christine Q. Kurihara
ebiodesign.org
University Printing House, Cambridge CB2 8BS, United Kingdom

Cambridge University Press is part of the University of Cambridge.

It furthers the University’s mission by disseminating knowledge in the pursuit

of education, learning, and research at the highest international levels of excellence.

www.cambridge.org
Information on this title: www.cambridge.org/9781107087354

© P. Yock, S. Zenios, J. Makower, T. Brinton, U. Kumar, J, Watkins, L. Denend, T. Krummel,

and C. Kurihara 2015

This publication is in copyright. Subject to statutory exception

and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without the written
permission of Cambridge University Press.

First published 2010

Second edition 2015

Printed in the United States of America by Sheridan Books, Inc.

A catalogue record for this publication is available from the British Library

Library of Congress Cataloguing in Publication data

Biodesign : The process of innovating medical technologies / editors, Paul G. Yock, Stefanos Zenios,
Joshua Makower, Todd J. Brinton, Uday N. Kumar, F. T. Jay Watkins ; principal writer, Lyn Denend ;
speciality editor, Thomas M. Krummel ; web editor, Christine Kurihara. – 2.
p. ; cm.
Includes bibliographical references and index.
ISBN 978-1-107-08735-4 (Hardback)
I. Yock, Paul G., editor.
[DNLM: 1. Biomedical Engineering–organization & administration. 2. Biomedical
Technology. QT 36]
R856
610.28–dc23 2014025957
ISBN 978-1-107-08735-4 Hardback

Additional resources for this publication at ebiodesign.org

Cambridge University Press has no responsibility for the persistence or accuracy of
URLs for external or third-party Internet websites referred to in this publication,
and does not guarantee that any content on such websites is, or will remain,
accurate or appropriate.
To innovators – past, present, and future – and the patients who inspire them . . .

. . . and in tribute to Wallace H. Coulter, a pioneer in developing

affordable healthcare technologies with a global impact.

Contents

Preface ix 4.2 Regulatory Basics 319

Focus on Value 1 4.3 Reimbursement Basics 350
Global Perspectives 7 4.4 Business Models 373
Ô Africa 10 4.5 Concept Exploration and Testing 404
Ô China 14 4.6 Final Concept Selection 432
Ô Europe 18 Acclarent Case Study: Stage 4 449

4
Ô India 23
Ô Japan 28 PART III: IMPLEMENT
Ô Latin America 32
Stage 5: Strategy Development 457
Process Insights 39
5.1 IP Strategy 458

PART I: IDENTIFY
Stage 1: Needs Finding
4
49
5.2 R&D Strategy
5.3 Clinical Strategy
5.4 Regulatory Strategy
478
503
534
1.1 Strategic Focus 50 5.5 Quality Management 551
1.2 Needs Exploration 67 5.6 Reimbursement Strategy 573
1.3 Need Statement Development 90 5.7 Marketing and Stakeholder Strategy 604
Acclarent Case Study: Stage 1 105 5.8 Sales and Distribution Strategy 635
Stage 2: Needs Screening 113 5.9 Competitive Advantage and Business Strategy 663
2.1 Disease State Fundamentals 114 Acclarent Case Study: Stage 5 686
2.2 Existing Solutions 133 Stage 6: Business Planning 701
2.3 Stakeholder Analysis 152 6.1 Operating Plan and Financial Model 702
2.4 Market Analysis 182 6.2 Strategy Integration and Communication 725
2.5 Needs Selection 215 6.3 Funding Approaches 748
Acclarent Case Study: Stage 2 239 6.4 Alternate Pathways 786

4
Acclarent Case Study: Stage 6 809
PART II: INVENT
About the Author Team 817
Stage 3: Concept Generation 249
Image Credits 821
3.1 Ideation 250
Glossary 822
3.2 Initial Concept Selection 268
Index 833
Acclarent Case Study: Stage 3 280
Stage 4: Concept Screening 285 See ebiodesign.org for videos, online appendices, and active web links to
4.1 Intellectual Property Basics 286 the resources listed in each chapter.

vii
Preface

There is no greater satisfaction than seeing a patient The text describes the biodesign innovation process,
being helped by a technology that you’ve had a hand in which we initially developed to support the biodesign
creating. And thanks to continuing advances in science innovation and fellowship programs at Stanford Univer-
and technology, healthcare is more open for innovation sity. Over 13þ years, the process has been built and
than at any time in history. refined based on:
Despite this promise, however, medical technology
• Presentations and mentoring by more than
innovators face significant hurdles – especially in the
200 industry leaders who have participated in our
new era of cost containment. If not managed skillfully,
training programs
patents, regulatory approval, reimbursement, market
• Our experience advising more than 150 project teams
dynamics, business models, competition, financing, clin-
that have applied the process to their work
ical trials, technical feasibility, and team dynamics (just
• Feedback from those who have learned the process
to name a few of many potential challenges) can all
through our executive education courses, as well as
prevent even the best idea from reaching patient care.
input and suggestions from students, fellows,
So, where should you begin as an innovator? What
instructors at other universities, and industry
process can you use to improve your chances of success?
representatives using the first edition of the book
What lessons can you learn from the inventors, engin-
• Extensive field-based research
eers, physicians, and entrepreneurs who have succeeded
and failed in this endeavor before? This book delivers Our confidence that the process is effective is based on
practical answers to these important questions. the results of the students and fellows trained at Stanford
and through our university-based partnerships in India
and Singapore. Already over 30 of these projects have
Who should read it and why?
been converted to externally funded companies that have
Biodesign: The Process of Innovating Medical Technolo- raised an aggregate of over $250 million. More impor-
gies provides a comprehensive roadmap for identifying, tantly, even though these are young companies, over
inventing, and implementing new medical devices, diag- 250,000 patients have already been treated by the tech-
nostics, and other technologies intended to create value nologies invented by our trainees. We have also been
for healthcare stakeholders. It has been written to be encouraged by the positive feedback we received on the
approachable for engineering, medical, and business stu- process following the release of the first edition of the text.
dents at both the undergraduate and graduate level, yet
comprehensive and sophisticated enough to satisfy the
What’s new and important in the second
needs of experienced entrepreneurs and medtech execu-
edition of the biodesign book?
tives. For instructors, it provides a proven approach for
teaching medical technology innovation that begins pre- We initially wrote the Biodesign book because there was
idea and extends through preparing for commercializa- no comprehensive text that described the complete
tion. It is ideally suited to support team-oriented, project- innovation process with a focus on the medical technol-
based learning experiences in academic and industry ogy sector. Many excellent books address entrepreneur-
settings. ship generally or pieces of the device development

ix
Preface

process, but our goal was (and is) to provide a definitive, read the section “Focus on Value” in the pages that
comprehensive resource for the medtech community. follow the preface for more context on value and how
Since the first edition of Biodesign was published in it is treated within the text.
2010, however, the medical technology industry and, 2. Going global – The first edition of the text was largely
more broadly, the healthcare ecosystem has experienced US-centric, but in the second edition we devote
tumultuous change. As healthcare costs escalate on an significantly more attention to describing the changes
unsustainable trajectory, a high priority is being placed in the process of medtech innovation resulting from
on medical technologies that deliver value – that is, good the growing importance of markets, clinical
outcomes at an affordable cost. In parallel with these opportunities, and sources of innovation outside of
forces, the global medical technology landscape is evolv- the United States. We focus on key strategic
ing rapidly, with large-scale demand for improved considerations for operating in a more global
healthcare and a new focus on frugal innovation for healthcare environment and share substantially more
developing economies. In this changing environment, examples from medtech innovators working around
veteran medtech innovators may feel as though they the world. To dig more deeply into some key issues,
are treading unfamiliar new ground, and aspiring invent- we have added a section on “Global Perspectives,” in
ors and entrepreneurs are faced with navigating an even which we spotlight six regions that present interesting
more complex and challenging landscape. medtech opportunities.
Besides the need to update the text in response to these 3. Better ways to teach and learn – While the
major environmental changes, we felt a personal impera- fundamental biodesign innovation process remains
tive to create the second edition. Over the past several the same in the new version of the text, we have
years we have learned more about how to teach the rewritten a number of sections to provide more focus
biodesign innovation process. We’ve had the chance to and clarity; and we offer more examples and case
use the text with students, fellows, entrepreneurs, and material in areas that are best understood
executives, and gather feedback from instructors at other experientially. One important take-away is that our
universities around the world who are using it in their approach appeared too linear in the first edition, and
courses. Through these interactions, we realized that we have made concerted effort to explain within the
there were messages that we could clarify and some that chapters when and why a more iterative method is
we should emphasize more strongly. As a result, we have necessary. We have also captured a number of
revised the text substantially for the second edition to important lessons in the “Process Insights” section
address three critical factors: that follows the preface. Readers will significantly
increase their effectiveness if they take these key
1. Value orientation – The healthcare industry has
themes to heart and keep them in mind as they work
become increasingly competitive, with the primary
through the chapters within each major section of
customers of medical technologies – governments,
the text.
private payers, provider groups, and patients –
focusing intensely on the cost of medical technologies Our core belief remains that innovation is both a process
and related services. In this environment, it is more and a skill that can be learned. We hope that the new edition
essential than ever for products and related services of Biodesign will help to better equip aspiring and experi-
to demonstrate measurable value to their intended enced innovators alike to be successful in the dynamic
users. The second edition of Biodesign more explicitly medtech industry. Tumultuous changes notwithstanding,
recognizes the importance of value generation in the dynamics of the emerging healthcare burden around
healthcare and includes guidance to better address the world demand continued innovation, and technology
this imperative in all phases of our process. Be sure to innovators will continue to be central to this mission.

x
 Preface

How to maximize the benefit of this book: level innovation or business planning classes). And
a user’s guide experienced device executive and entrepreneurs can
use the book as a reference as they encounter specific
The steps in the biodesign innovation process build on
challenges on their way to market with a new
each other and, in this respect, it makes sense for readers
technology.
to work their way through the text in chapter order.
In terms of organization, we present the biodesign
Taking this approach provides innovators with the most
innovation process in:
complete understanding of the biodesign innovation pro-
cess and the most valuable overall learning experience. • three distinct phases, Identify, Invent, and
We have heard of many medtech innovators using the Implement;
text as a roadmap for their projects, starting at the begin- • that are divided into two stages each (six in total);
ning and following the process to help drive their • which are supported by 29 core activities, with a
progress. chapter on each one.
That said, each chapter is sufficiently robust to support
Figure P1 summarizes the overall process. Keep in mind
alternate approaches to the content. For instance,
that it’s not nearly as linear in practice as it appears in
instructors can pick and choose the chapters most rele-
this depiction. The iterative and cyclical nature of the
vant to their specific courses (e.g., some of the chapters
process is further explained throughout the text.
in the Implement section may be a bit advanced for
As you navigate Biodesign, we encourage you to
undergraduates, but they are ideally suited to graduate-
pay attention to a series of different features that

FIGURE P1
The biodesign innovation process.

xi
Preface

have been designed to help you optimize the value topics spanning the complete biodesign innovation
you receive from the text. process. These clips, which include expert
presentations and advice, interviews with innovators,
As you begin – Immediately following the preface, you’ll
demonstrations, and other exercises, are available to
find relevant information that expands upon the three
all readers in the video library at ebiodesign.org.
primary reasons we created the second edition of the
Those reading the electronic version will find select
book. These materials set a context for understanding
videos embedded in the book directly where they are
and applying the content of the chapters.
most relevant.
• Focus on value – The medtech industry is in the
midst of a transition to a stronger value orientation, in Expanded
which the improvement a technology offers relative • “From the Field” case studies – These short
to its price is an essential ingredient of success. This stories, which provide real-world examples of
section explores the forces behind this shift and their how innovators, teams, and companies have
implications to innovators as they design, develop, tackled important challenges in the biodesign
and prepare to commercialize new products and innovation process, were one of the most popular
services. features of the first edition. Accordingly, we
• Global perspectives – An introduction to factors increased the number of case studies by more
driving the globalization of the medtech industry and than 50 percent. Look for 36 new and/or
changes in how innovators source, develop, and sell rewritten stories in the second edition of the text,
their technologies. We also profile six regions, Africa, many of which spotlight groups developing
China, Europe, India, Japan, and Latin America, innovative medtech solutions outside of the US.
providing background on these geographies, At the end of each stage, we present a case
highlighting potential barriers to medtech innovation, study on Acclarent, maker of a device to
and outlining tactics that can help innovators work treat chronic sinusitis. This running example
more successfully in these areas. spotlights how one real company executed the
• Process insights – Through feedback and our entire biodesign innovation process, from need
teaching experience, we have identified a series of finding to commercialization.
key themes that you should keep top-of-mind while
reading the chapters within each major section of the Updated
book. These are core strategies that cut across the • “Getting Started” sections – For each chapter,
stages and activities within each phase and will help readers will find a practical, action-oriented guide
you to keep on track as you proceed with the process. that they can follow to execute every step in the
Instructors that emphasize these points in their biodesign innovation process when working on an
teaching and readers who embrace this information actual project. To make these sections more useful
will be able to navigate the biodesign innovation in the electronic version of the text, they have been
process more effectively. populated with active web links to take readers
directly to essential references and resources. In the
Throughout the book – You should also be on the look-
print version, the key steps for getting started are
out for a few categories of information that have been
listed, with the complete, interactive guides
added or broadened in the second edition.
accessible at ebiodesign.org.

New Enhanced
• Videos – The second edition of Biodesign is supported • ebiodesign.org – To better support the second edition
by a brand new collection of nearly 300 videos on of Biodesign, we have completely redesigned

xii
 Preface

ebiodesign.org to be more user friendly and content important updates, new videos, and other learning
rich. In addition to the video library and interactive materials as they become available. Instructors can
getting started sections, ebiodesign.org includes access our course syllabus, select presentation
additional content in the form of online appendices slides, and exam questions/answers via the Instructor
for many chapters. This is also where we’ll post Resources section of the site.

xiii
Focus on Value

What do we mean by “value” and why is it countries,4 it does not necessarily provide the best care
so important? to its citizens. In 2000, when the World Health Organiza-
tion ranked the health systems of its 191 member states
The escalation of healthcare costs is one of the major
for the first time ever, the US found itself in 37th pos-
economic and political issues of our time. The problem is
ition.5 In a more recent study that compared the US to
most apparent in the United States, where healthcare as a
Australia, Canada, Germany, the Netherlands, New Zea-
share of the economy has more than doubled over the
land, and the United Kingdom on measures of quality,
past 35 years. Spending on health accounted for 7.2
efficiency, access to care, equity, and the ability of citi-
percent of the nation’s gross domestic product (GDP) in
zens to lead long, healthy lives, America occupied last
1970, expanded to 16 percent in 2005, and is projected to
place. As the report pointed out, “While there is room for
be as high as 20 percent of GDP by 2015.1
improvement in every country, the US stands out for not
Simply put, the US economy cannot sustain this spend-
getting good value for its healthcare dollars.”6
ing trajectory, which has outpaced GDP growth for years
Against this backdrop, economists, researchers, and
(see Figure V1).2 The problem is not just straining the
policy makers alike have pointed to medical technology
federal budget: state and local governments have been
as a dominant factor driving increased health expend-
forced to reduce support for education, infrastructure,
itures in the US. Their estimates of the impact of tech-
and other critical expenditures as they struggle to fund
nical innovation on accelerating costs vary considerably,
Medicaid and other health programs. In the private
but some argue that new technologies and the proced-
sector, the cost of employment-based health insurance
ures that accompany them account for one-third to one-
is one of the main reasons workers have seen their wages
half of real long-term spending growth in healthcare.7 To
stagnate.3
be sure, many of these technologies have provided major
Despite the fact that the US spends two-and-a-half
advancements in health and longevity, ranging from
times more per capita on health than most developed

FIGURE V1
Indexes of US health expenditures
and GDP (excluding health
expenditures), per capita, adjusted
for inflation, 1977–2007 (compiled
based on National Health
Expenditure data, CMS.gov).

1
Focus on Value

diagnostic breakthroughs such as CT and MRI scanning developed countries such as the US, providers, hospitals,
to life-saving surgical and interventional therapies for the clinics, and (in some cases) payers are consolidating to
heart and brain. Increasingly, however, even revolution- achieve economies of scale and organization. Value-
ary developments such as these are being weighed based payment models are emerging. And purchasing
against the unsustainable rise in healthcare costs. managers and executives are playing a more central role
Since the birth of the modern medtech industry in the in deciding which medical technologies to adopt, with
mid-twentieth century, the majority of medical technol- physicians influencing, rather than dictating, those
ogy companies pursued a philosophy that has been choices. In developing countries, health systems recog-
described as “progress at any price.”8 Innovators and nize they are facing increased demand for medical tech-
companies were focused on developing new products nologies but are actively pursuing more affordable, cost-
that resulted in improved clinical outcomes, almost effective products and services designed specifically to
regardless of their associated cost. In some cases, this address the needs of patients and providers in settings
meant simply making marginal enhancements in order to with fewer resources. In other words, around the world,
sell a next-generation technology at a higher price. These the need for medical technologies that deliver clear value
strategies were successful for many years because the to their intended users has never been more imperative.
fee-for-service payment system in the US largely The concept of value is widely understood in general
uncoupled the providers, who make the treatment deci- terms, but is more difficult to articulate as a concept to be
sions, from the payers, who bear the costs of their considered throughout the biodesign innovation process.
choices. In this way, the market forces that operate in Here are a few key points that resonate with us about
other sectors of the economy have not been effective in value and value creation:
maximizing the value of health technologies and services.
By spending trillions of dollars on new innovations, the • Value is an expression of the improvement(s) a new
US fueled the growth of the medical technology industry technology and its associated services offer relative to
and helped to foster a view that complex and expensive the incremental cost. Just because a new technology
technology was the hallmark of superior healthcare. provides an improvement doesn’t mean it will
While the US has been hardest hit by uncontrolled create value.
health spending, it certainly is not alone. The countries • Importantly, value is not realized unless the cost/
in the European Union and Japan, which together with improvement equation is compelling enough – that is,
the US account for 75 percent of all medtech sales today,9 has enough marginal benefit over other available
have also been wrestling with how to manage mounting solutions – to cause decision makers to change their
healthcare costs. Moreover, as the middle class expands behavior and adopt the new technology.
in developing countries such as India, China, and Brazil, • We are in a period of transition with respect to who
these patients are demanding increased access to more the key decision makers are in the healthcare field.
advanced healthcare, potentially initiating the same In particular, purchasing power is shifting from
spiral of escalating health expenditures. In fact, these individual physicians to integrated health systems
issues are already emerging, with medical device sales and patients are becoming more knowledgeable
growing two- to five-times faster in these markets than in and active healthcare consumers. In the process,
developed countries.10 both of these audiences are demanding greater
Together these forces have launched a fundamental cost transparency.
shift in the healthcare sector. The affordability of care • In parallel, the assessment of value is evolving from
relative to its quality is now a primary focus in both being product specific to outcomes oriented. Stated
developed and developing markets. “Progress at any another way, decision makers are increasingly
price” is no longer a tenable strategy as health systems evaluating total solution offerings across an episode
universally place increasing emphasis on ensuring a of care rather than focusing on an individual
good value for the healthcare dollars they spend. In technology or service. Within this context, new types

2
 Focus on Value

of value-based offerings and innovative business

models are emerging.

Understanding what we mean by value is important

because it has a major impact on how you approach the
biodesign innovation process. In short, while medtech
companies used to strive to produce products that
delivered optimal improvement (without undue attention
to cost), we are now seeing purchasers demand offerings
that drive cost as low as possible. In certain situations
there will be willingness to sacrifice some degree of per-
formance for a better price (see Figure V2). Amidst the
uncertainty of today’s value-oriented environment, tech-
nologies that significantly – not incrementally – generate
measurable savings while providing acceptable (or better)
quality will be the ones with the clearest path forward.
So how can innovators practically address value in the
design, development, and commercialization of their
FIGURE V2
medtech offerings? There are multiple steps in the biode-
The medtech landscape – then and now.
sign innovation process where opportunity exists to
create and deliver value (as you navigate the book, you
will see substantial attention to value in almost every
• Value estimate – Once promising needs have been
chapter). But there are three critical points at which
identified, innovators dive deeper into understanding
value should be a primary focus:
the potential to create and deliver value through the
• Value exploration – Early in the biodesign needs screening stage of the process (especially
innovation process (see chapters 1.1 and 1.2), chapters 2.4 and 2.5). Quantifying value in this stage
innovators should begin scanning for problems and of the process can be tricky since no specific solutions
opportunities that are ripe for value realization. This have yet to be defined. However, innovators can
means actively seeking need areas where improved still develop directional estimates of the value
economic outcomes can potentially be generated. As associated with their needs in order to ensure it is
they perform research, observations, and interviews, worth moving forward into concept generation.
innovators have traditionally watched for what we These estimates are based broadly on understanding
call practice-based value signposts; for example, who the real decision makers are with respect to
opportunities to address problems such as keeping adoption/purchasing decisions in each need area,
patients out of the hospital, shortening the length of how significant they perceive the need to be,
hospital stays, and reducing procedure time. But in to what degree available solutions are effectively
the new environment, they should take a more addressing the need, and therefore how much
explicit plunge into investigating budget-based margin there is to offer a new technology with a
value signposts, such as big line items on facility different improvement/cost equation. The insights
budgets, negative outliers in the cost-effectiveness gleaned from explicitly considering value at this
of existing treatments, and extreme variations in early stage can save innovators from investing
treatment costs across geographies. These and other time, resources, and energy in developing solutions
economic signals will guide the next generation that ultimately will not offer a significant enough
of medtech innovators to promising areas to begin value proposition (see below) to drive decision
needs finding. makers to adopt them.

3
Focus on Value

• Value proposition – As the solution to a promising Former Senior Economist at the White House Council of
need begins to take shape, innovators can begin Economic Advisers
thinking about value in more concrete, concept- Victor Fuchs
specific terms. A value proposition describes the net Professor of Economics and Health Research and Policy
impact of the cost/improvement equation associated (emeritus), Stanford University
with a new offering in terms that are meaningful John Hernandez
to decision makers and sufficiently convincing to Vice President, Health Economics and Outcomes
elicit a change in their behavior. Value propositions Research, Abbott Vascular
form the core of a company’s sales and marketing Doug Owens
activities and become a source of its competitive Director of the Center for Health Policy, Stanford
advantage and differentiation (see chapters 5.7 University
and 5.9). Importantly, value propositions must Jan Pietzsch
be backed by strong evidence that resonates with President and CEO, Wing Tech Inc.
decision makers and the influencers that surround Consulting Associate Professor, Stanford University
them. In the new healthcare environment, value Bob Rebitzer
propositions increasingly require the company Consultant to the Clinical Excellence Research Center,
to share the risk of ensuring that the promised Stanford University
improvements and desired outcomes are realized Gordon Saul
at the stated cost. Executive Director of Biodesign, Stanford University
Christopher Wasden
These mechanisms for anchoring the biodesign innov-
Managing Director, US Healthcare Strategy and
ation process on value are broad and directional. We are Innovation Practice, PricewaterhouseCoopers
still in the early stages of what is clearly a profound shift
in the way medical technology innovation will address
NOTES
the economics of healthcare. But we hope that these
initial ideas, as well as the discussion of value that per- 1 “Snapshots: How Changes in Medical Technology Affect Health
meates the text, will serve as a useful starting point for Care Costs,” Henry J. Kaiser Family Foundation, March 2, 2007,
innovators as they embrace this new paradigm in device http://kff.org/health-costs/issue-brief/snapshots-how-changes-
innovation. in-medical-technology-affect/ (March 25, 2014).

As with any major economic and social transforma- 2 Victor R. Fuchs, “New Priorities for Biomedical Innovation,” New
England Journal of Medicine, August 19, 2010, http://www.
tion, there are tremendous opportunities for those who
nejm.org/doi/full/10.1056/NEJMp0906597 (March 25, 2014).
can position themselves to understand and take advan-
3 Ibid.
tage of the changes. And the wonderful part about this 4 “Why is Health Spending in the United States so High?,” Health at
particular technology sector is that the innovators who a Glance 2011: OECD Indicators, Organization for Economic
are able to make the transition may have the opportunity Cooperation and Development, http://www.oecd.org/
to benefit millions of patients around the globe. unitedstates/49084355.pdf (March 25, 2014).
5 “Health Systems: Improving Performance,” The World Health
Report, 2000, http://www.who.int/whr/2000/en/whr00_en.pdf
The biodesign working group on value (March 25, 2014).
6 “U.S. Ranks Last Among Seven Countries on Health System
Performance Based on Measures of Quality, Efficiency, Access,
Laurence Baker Equity, and Healthy Lives,” The Commonwealth Fund, June 23,
Chief of Health Services Research, Stanford University 2010, http://www.commonwealthfund.org/News/News-
Aaron (Ronnie) Chatterji Releases/2010/Jun/US-Ranks-Last-Among-Seven-Countries.aspx
Associate Professor, Duke University (March 25, 2014).

4
 Focus on Value

7 For an example, see Sheila Smith, Joseph P. Newhouse, and 9 “Medical Device Growth in Emerging Markets: Lessons from
Mark Freeland, “Income, Insurance, and Technology: Why Other Industries,” In Vivo, June 2012, file:///C:/Users/Lyn/
Does Health Spending Outpace Economic Growth,” Health Downloads/
Affairs, September/October 2009, http://content.healthaffairs. Medical_device_growth_in_emerging_markets_InVivo_1206%
org/content/28/5/1276.full (April 29, 2014). 20(3).pdf (March 25, 2014).
8 Fuchs, op. cit. 10 Ibid.

5
Global Perspectives

A world of opportunity … the medtech sector has become much more diverse in
recent years as healthcare has become a global priority.
Although the United States and Europe remain global Inventors and companies in countries around the world
leaders in medical technology innovation, the story of are playing an increasingly important role in sourcing

FIGURE G1
A snapshot of health and health-related spending in select countries around the world (compiled
from The World Bank data, 2011).
7
Global Perspectives

ideas, designing and developing them into viable prod- from around the world.5 Ireland has developed into a
ucts and services, and introducing them into patient care. prominent medtech manufacturing center, serving eight
In parallel, device sales in developing countries are of the top 20 medtech multinationals6 and attracting new
expanding at a rapid pace. As the US and Europe both enterprises of all sizes.
sustain growth rates in the low single digits, medtech Of course, each region has its own unique challenges
revenues in countries such as India and China are fore- and opportunities. In the pages that follow, we have tried
cast to increase at a compound annual growth rate of to give innovators a flavor for this range of issues and
14 percent and 26 percent, respectively.1 possibilities by profiling six important medtech markets.
The global transformation of the medtech sector has Europe and Japan represent geographies outside of the
been driven by multiple, interrelated factors. In US with well-established device industries; India, China,
developed markets, health systems are actively seeking Latin America, and Africa represent those in which the
to slow health spending associated with medical tech- sector is still emerging. The purpose of these profiles is
nologies as they become more cost conscious and to provide a context for healthcare innovation in these
attuned to the value these products deliver. Moreover, locations, highlight some of the barriers that innovators
as the time, expense, and complexity of developing new may encounter in working there, and share tactics they
solutions in environments like the US continues to can utilize to increase their chances of success. We’re
increase, innovators are moving offshore and creating grateful to the experts who worked with us to develop
new innovation hubs in locations around the world.2 this valuable content.
In developing markets, disease profiles are shifting from Additionally, innovators will find significantly more
infectious to chronic conditions, which makes diagnostic global content through the remainder of the Biodesign
and device solutions a more important part of efforts to text. While the book is still grounded in what’s required
meet the healthcare needs of patients. Governments and to identify, invent, and implement a new medical tech-
private healthcare providers alike are increasing health- nology in the US, we expanded our treatment of other
related spending (see Figure G1). And innovators and com- markets through the inclusion of more global guidance,
panies in low-resource settings are becoming leaders in as well as case studies that feature innovators and com-
inventing more affordable solutions that enable care deliv- panies working across the globe.
ery in any setting and reduce (rather than increase) its cost.3 Global expansion in the medtech sector can make it
Medtech innovators can certainly find compelling possible for patients traditionally underserved by med-
opportunities in both environments. They can also benefit ical devices to benefit from advanced technologies in
from thinking more globally about how – and where – they new and different ways. With the global medtech market
source, develop, and sell their new solutions. While many on its way to $440 billion by 2018,7 a world of opportun-
innovators historically used a single market as their base, ity truly awaits medtech innovators and the patients they
got established, and then expanded into new markets in a are committed to helping.
serial manner, they can now take a more global approach
from the very beginning of the biodesign innovation pro-
NOTES
cess. Various regions in the world are moving into promin-
ence in different parts of the medtech innovation process. 1 “Global Market for Medical Devices, 4th Edition,” Kalorama
To take just a few examples: Israel is home to over 700 med- Report, 2013, http://www.kaloramainformation.com/Global-

ical device companies and leads the world in the medtech Medical-Devices-7546398/ (March 10, 2014).
2 “Medical Technology Innovation Scorecard: The Race for Global
patents filed per capita.4 It has become a hotbed of inven-
Leadership,” PricewaterhouseCoopers, 2011, http://download.
tion and incubation of medical technologies, with a robust
pwc.com/ie/pubs/2011_medical_technology_innovation_
start-up scene. Argentina, Brazil, and Chile have become scorecard_the_race_for_global_leadership_jan.pdf (March
leaders in conducting high-quality, yet affordable clinical 10, 2014).
trials for pharmaceutical and medical device companies 3 Ibid.

8
 Global Perspectives

4 “How Did Israel Become a Hotbed for Medical Devices?,” Fierce 6 “Business in Ireland,” IDA Ireland, http://www.idaireland.com/
Medical Devices, August 14, 2013, http://www. business-in-ireland/life-sciences-medical-tec/ (January 27, 2014).
fiercemedicaldevices.com/story/how-did-israel-become-hotbed- 7 “Medtech Market to Achieve Global Sales of $440B by 2018,”
medical-devices/2013-08-14 (January 24, 2014). Evaluate press release, October 12, 2012, http://www.
5 “Climate Change in Latin America Makes for Successful Clinical evaluategroup.com/public/PressReleases/Medtech-Market-to-
Trials,” MEDPACE, http://www.medpace.com/pdf/ Achieve-Global-Sales-of-$440-Billion-by-2018.aspx (January
conductingtrialsinlatinamerica.pdf (March 10, 2014). 27, 2014).

9
Africa

Background millions of people must travel vast distances to receive

Africa is on the rise. The twenty-first century has been basic medical care. As access to care improves, it is
called the “African Century” due to the continent’s poten- estimated that Africa will still require at least 800,000
tial for increased economic development in the coming additional doctors and nurses to adequately meet the
decades.1 From 2000–2012, economic growth averaged healthcare needs of its population.13
more than 5 percent per year,2 driven by the recovery of However, advances are under way with the potential
commodity prices, government economic and policy to improve healthcare delivery. Low-cost broadband
reforms, and restoration of international donor confi- mobile phones and Internet connections are reaching
dence and aid.3 Africa’s collective gross domestic prod- new populations and accelerating Africa’s economic
uct (GDP) topped US$1.7 trillion in 2012 (making it development. Mobile phone penetration surpassed
nearly comparable to Russia or Brazil),4 and its middle 80 percent in late 2013.14 Approximately 16 percent of
class expanded to more than 34 percent of the contin- people on the continent are now online, and that number
ent’s 1 billion people.5 is rapidly growing.15 In the health sector, access to these
Poverty is declining, yet Africa still has the highest technologies is expected to enable greater use of remote
poverty rate in the world with 47.5 percent of the diagnosis, treatment, and education – extending the
population living on less than US$1.25 a day.6 The con- reach of scarce physician and nursing resources. Apply-
tinent also accounts for 25 percent of the global disease ing technology to improve healthcare in Africa is esti-
burden.7 Maternal health, child health, HIV, tubercu- mated to improve productivity, reduce costs, and deliver
losis, and malaria continue to be the continent’s greatest financial gains to the economy of US$84–$188 billion by
health challenges. What may be surprising is that over 2025.16
the next 10 years, Africa will experience the largest While Africa has great potential for economic growth,
increase in deaths from cardiovascular disease, cancer, the medical device industry is in its earliest stages of
respiratory disease, and diabetes of any continent in the development. Combined sales of medical device and
world.8 For instance, the World Health Organization esti- equipment across African countries are just over US$3.2
mated that in 2008 the prevalence of hypertension was billion,17 with most medtech products imported from
highest in its Africa region, with nearly half of the popu- Asia, Europe, and North America. Medical products
lation affected,9 and this figure is on the rise. imports expanded at a compound annual rate of 7.5
Generalities are difficult to apply across this diverse percent from 2006–2010, with the fastest growth seen
continent. It is a massive, highly fragmented mosaic of in western and northern Africa.18 Two key factors have
more than 50 countries, with an estimated 2,000 lan- prevented a stronger growth rate in medtech sales to
guages spoken and thousands of distinct ethnic groups. date. First, Africa currently has insufficient buying power
The continent’s diverse population is expected to double for high-end technologies. Second, in some countries
by 2050, from 1 billion to more than 2 billion.10 Africa is there is not a medical technology ecosystem in place that
endowed with more than 30 million square miles of can support adoption through the consistent and effect-
varied geography and could fit China, India, the United ive sale, distribution, and service of complex medtech
States, and most of Europe within its physical boundar- products as well as the training of healthcare providers in
ies.11 Across this great expanse, the continent’s health- their use. South Africa, Nigeria, and several North and
care infrastructure is evolving. African governments are East African countries represent the largest opportunities
working to expand healthcare delivery systems through for medtech companies, both for adoption and local
public and private investment,12 but in the meantime, manufacture of medtech products. It is anticipated that

10
 Africa

medium-sized African economies such as Kenya, sustained adoption. For example, the Ministry of Health
Ethiopia, and Tanzania will become significant medtech within an African nation might decide to mandate the
growth drivers for the continent in the coming decades. use of auto-disable syringes within its public health
Total annual health expenditure in the continent was centers, and a large multilateral organization or NGO
estimated at US$117 billion in 2012, with roughly half of may agree to fund the initiative. However, successful
this amount funded by African governments and the scale-up may depend on getting buy-in from in-country
other half provided by private sources, including charit- healthcare providers treating patients in public hospitals.
able/aid organizations and out-of-pocket payments.19 Healthcare provider input is critical to the long-term
Although this spending is dramatically uneven across sustainability and use of the technology. Misalignment
countries (e.g., South Africa accounts for nearly 30 per- among healthcare stakeholders can also lead to products
cent of the total), there is substantial room for the med- being procured that are not appropriate for the local
tech industry to grow.20 Currently, many medtech setting. For instance, healthcare providers and patients
innovations are aimed at the “bottom-of-the-pyramid” in Africa can benefit from high-throughput diagnostic
population. This massive group is likely to see benefits technologies that can be deployed in central labs as well
from the growing community of non-governmental as rugged point-of-care tests that can be used in clinics
organizations (NGOs), governments, and entrepreneurs and healthcare centers in remote, rural areas. The chal-
devoting resources to address their health needs. To be lenge is to make sure that the equipment funded, pro-
well equipped for the future, innovators also need to cured, and deployed is appropriate for the setting of use,
prepare for Africa’s rising middle class, as this growing underscoring the importance of decision makers being in
population will lead to a bigger consumer market. Africa tune with local needs and requirements.
is on the cusp of transformative change, enabled, in part, Perhaps the greatest challenge of working in many
by innovations that improve access and quality at an parts of Africa is related to its limited physical infrastruc-
affordable cost. ture, which can hinder productivity and add consider-
able expense to medtech applications. Specifically,
Challenges supply chain issues such as transportation and power
Medtech innovators should be mindful that many Afri- are critical barriers to overcome. Where available, the
can markets are smaller, riskier, and therefore less power supply can be unreliable, prone to chronic
attractive for private companies (such as venture capital- outages, and expensive.21 Similarly, despite being the
ists) to invest in, especially without special incentives. main mode of transport for goods, roads are scarce; only
Additionally, since advanced medical technologies have one in three rural Africans has access to an all-season
been largely absent in many countries, innovators must road.22 Also, transportation costs in Africa can be costly;
demonstrate the long-term value of their technologies basic services can be twice as much as the world’s aver-
before adoption will be considered. Innovators and com- age.23 Air travel, essential to develop regional markets, is
panies working in Africa should expect to devote signifi- constrained by insufficient capacity. In fact, in many
cant time and resources to market-development instances, flying between African countries may involve
activities, such as awareness raising, demand generation, a connecting flight via the Middle East or Europe. The
comprehensive introduction strategies, and training of implications of these infrastructure challenges can be
healthcare providers. considerable, ranging from product stock-outs and
Another potential barrier is linked to the complex bottlenecks to lifesaving interventions failing to reach
interplay of healthcare stakeholders and decision makers patients in a timely manner.
in Africa. Often, “the people who choose, the people who The regulatory infrastructure for medical products is
use, and the people who pay the dues” for medical also nascent in Africa, with regulatory processes and
technologies are distinct and not always aligned. This requirements varying from country to country. Few Afri-
can result in products failing to achieve widespread or can countries have national regulatory agencies for

11
Global perspectives

medical devices24 although many have drug regulatory something unique and critical to the solution.
agencies. Some countries accept the regulatory approvals Historically, NGOs have provided knowledge of the
of Europe and the United States for devices. In most communities and technical capacity with minimal cost
instances, international approvals do not replace African to the private-sector partner. The involvement of
country policies; however, these approvals can often private-sector participants enhances the financial
allow for faster approval of a product for in-country viability of the innovation and can lead to more
use. It is important to note that the European CE mark sustainable results, sometimes tapping into market
and US Food and Drug Administration approval are forces to improve access and affordability.
intended for products used in environments within Governments offer broad decision-making authority
Europe and the United States. The settings of use in and the ability to align stakeholders around the
Africa may be drastically different, and innovators activities of the partnership. While public–private
should expect to conduct in-depth needs assessments as partnerships require diligence, cross-sector
well as in-country clinical studies to ensure that products cooperation is critical to creating the momentum
are appropriate for the place of use and acceptable for the needed to advance medical technologies in Africa. (See
people who will use them. 2.3 Stakeholder Analysis and 6.4 Alternate Pathways.)
3. Funding models require innovative thinking, too.
Tactics Innovations, even affordable ones, require
Although Africa can be a challenging place to work, substantial investment. Admittedly, traditional
opportunities abound for those interested in applying medtech funding sources such as venture capital are
appropriate, affordable medtech solutions to the contin- rare in Africa. But the climate for stimulating
ent’s vast health problems. As they tackle product devel- investment in an African-based manufacturer to
opment and commercialization, innovators will benefit produce medical device products for Africa is
from the following guidelines: improving. International agencies are increasingly
shifting their support to in-country, on-the-ground
1. It’s all about providing a complete solution. ventures and transitioning from aid to investment.25
Medical devices that are affordable, robust, easy to And governments, global donors doing in-country
use, and low maintenance are needed in Africa. work, and corporations seeking to enter or expand
Innovators can potentially make a huge impact by into Africa are playing interesting new roles. For
introducing fundamental – yet disruptive – health instance, a recent medtech collaboration in Africa
technologies that are appropriately designed for involved a large medtech multinational providing
Africa’s remote and low-resource settings. technology and product development support, an
Innovators must learn the unique regional needs NGO assisting with product validation and business
within the African context and address the ones model development, a local government agency
where essential clinical, infrastructure, economic, committing co-funding to the project, and a local
and ongoing support requirements can be met. (See entrepreneur leading the management of the
1.2 Needs Exploration, 2.5 Needs Selection, and 4.6 venture. “Funding,” in other words, can come in
Final Concept Selection.) many different forms. (See 6.3 Funding
2. Partnerships are key. Novel, creative collaborations Approaches.)
can provide medtech innovators with new pathways
to success and scale in Africa. Conditions are primed Good luck! Bahati nzuri! Sterkte! Nasiib wacan! ‫ﺡﻅﺍ ﺱﻉﻱﺩﺍ‬
for governments, NGOs, and private businesses to Anurag Mairal
work together. Increasingly, these public–private Program Leader, Technology Solutions, PATH
partnerships are being formed to tackle health and Rachel Seeley
social issues in Africa. Each of the partners brings Information and Communications Specialist, PATH

12
 Africa

theguardian.com/global-development/2013/jun/13/nigeria-
NOTES larger-population-us-2050 (January 29, 2014).
11 “The True Size of Africa,” The Economist, 2010, http://www.
1 “Thabo Mbeki’s Victory Speech,” BBC News, June 3, 1999,
economist.com/blogs/dailychart/2010/11/cartography (March
http://news.bbc.co.uk/2/hi/world/monitoring/360349.stm
20, 2014).
(March 20, 2014).
12 “Hospital Purchasing and Reimbursement for Medical Devices
2 “Main Drivers of Africa’s Economic Performance,” African
in Key Sub-Saharan African Markets,” op. cit.
Development Report 2012, African Development Bank Group,
13 Ibid.
http://www.afdb.org/fileadmin/uploads/afdb/Documents/
14 “Naziha Bagui, Mobile Money: The Best Route to the African
Publications/African%20Development%20Report%202012%
Consumer,” Infomineo.com, January 14, 2014, http://blog.
20-%20Main%20Drivers%20of%20Africa%E2%80%99s%
infomineo.com/2014/01/14/mobile-money-the-route-to-the-
20Economic%20Performance.pdf (March 20, 2014).
african-consumer/#more-530 (March 20, 2014).
3 “Hospital Purchasing and Reimbursement for Medical Devices
15 “Lions Go Digital: The Internet’s Transformative Potential in
in Key Sub-Saharan African Markets,” Frost & Sullivan, 2007,
Africa,” McKinsey & Company, November 2013, http://www.
http://www.frost.com/prod/servlet/frost-home.pag (July
mckinsey.com/insights/high_tech_telecoms_internet/
16, 2014).
lions_go_digital_the_internets_
4 “Annual Development Effectiveness Review,” African
transformative_potential_in_africa (March 20, 2014).
Development Bank, 2012, http://www.afdb.org/fileadmin/
16 Ibid.
uploads/afdb/Documents/Project-and-Operations/ADER%
17 “African Medical Device Market: Facts and Figures 2012,”
202012%20(En).pdf (March 20, 2014).
ReporterLinker.com press release, December 13, 2012, http://
5 Mthuli Ncube, Charles Leyeka Lufumpa, and Steve Kayizzi-
www.prnewswire.com/news-releases/african-medical-device-
Mugerwa, “The Middle of the Pyramid: Dynamics of the Middle
market-facts-and-figures-2012-183352861.html (March
Class in Africa,” African Development Bank, April 20, 2011,
20, 2014).
http://www.afdb.org/fileadmin/uploads/afdb/Documents/
18 Ibid.
Publications/The%20Middle%20of%20the%20Pyramid_The
19 Ibid.
%20Middle%20of%20the%20Pyramid.pdf (March 20, 2014).
20 Ibid.
6 “Africa Development Indicators,” The World Bank, 2013,
21 “Fact Sheet: The World Bank and Energy in Africa,” The World
https://openknowledge.worldbank.org/bitstream/handle/
Bank, http://go.worldbank.org/8VI6E7MRU0 (March
10986/13504/9780821396162.pdf?sequence=1 (March
20, 2014).
20, 2014).
22 “Transforming Africa’s Infrastructure,” The World Bank,
7 “Hospital Purchasing and Reimbursement for Medical Devices
November 12, 2009, http://go.worldbank.org/NGTDDHDDB0
in Key Sub-Saharan African Markets,” op. cit.
(March 20, 2014).
8 Ama de-Graft Aikins, Nigel Unwin, Charles Agyemang, Pascale
23 Ibid.
Allotey, Catherine Campbell, and Daniel Arhinful, “Tackling
24 “National Regulatory Agencies for Medical Devices: Africa
Africa’s Chronic Disease Burden: From the Local to the Global,”
Region,” World Health Organization, http://www.who.int/
Globalization and Health, 2010, http://www.
medical_devices/safety/NRA_Africa_Region.pdf
globalizationandhealth.com/content/6/1/5 (March 20, 2014).
(March, 2014).
9 “Raised Blood Pressure: Situation and Trends,” World Health
25 Bekele Geleta, “Investing in Africa: A Sustainable Means to End
Organization, http://www.who.int/gho/ncd/risk_factors/
Aid Dependency,” Devex, October 19, 2012, https://www.
blood_pressure_prevalence_text/en/index.html (March 20, 2014).
devex.com/en/news/investing-in-africa-a-sustainable-means-
10 Claire Provost, “Nigeria Expected to Have Larger Population
to-end-aid/79494 (March 20, 2014).
than U.S. by 2050,” The Guardian, June 13, 2013, http://www.

13
China

Background schemes are largely inadequate to cover basic care but

China is perhaps the most impressive economic develop- rather focus on protecting patients from catastrophic
ment story in modern history. Sustaining annual growth health events. As a result, the Chinese typically pay for
1
rates upwards of 9 percent for more than two decades, basic health services out-of-pocket, causing many indi-
the country’s gross domestic product (GDP) reached viduals to delay diagnosis and treatment until they are
US$8 trillion in 2012 (second only to the United States critically ill. For those who do seek care, access and
at US$16 trillion).2 This remarkable expansion has lifted quality are dramatically uneven between urban and rural
hundreds of millions of Chinese out of poverty and settings, and highly dependent on one’s ability to pay.
created a new middle class that is larger than the entire Shortages of physicians, facilities, and other resources
US population.3 further complicate China’s ability to provide adequate
With more than 1.35 billion people, China has the care.15
largest citizenry in the world.4 In 2011, the country’s The government is working to reform China’s health-
urban population surpassed its rural population for care system, with a goal of making basic care available
the first time, with close to 700 million people living across the country by 2020.16 However, with several
in China’s cities.5 Population growth in China has hundred million people entering the healthcare system
decreased steadily over the last 20 years due to the over the past decade, the Chinese government, as a
controversial one-child policy (from approximately 1.2 single payer, is critically concerned about managing
percent to less than half of one percent)6 and is expected healthcare costs. Generally, this translates into intense
to continue to decline. The country’s median age is just price competition (especially from indigenous manufac-
35 years, compared to nearly 40 years in more developed turers), lower reimbursement for medical devices, and a
countries.7 However, as a whole, the population is aging dramatic need for innovations that can facilitate
rapidly; senior citizens will account for as much as 35 per- adequate (not cutting-edge) care for large numbers of
cent of the Chinese people by 2053.8 patients at affordable rates. For medical technologies,
One of the most important challenges facing China in the Ministry of Health oversees the bidding and
the twenty-first century is how to allocate healthcare tendering system used in public hospitals to purchase
resources for its massive population. Despite progress new medical equipment. The tender process sets prices,
in the country’s economic transformation, China signifi- which are subject to a ceiling in most parts of China.
cantly lags the developed world in its ability to provide They also decide which medical device manufacturers
even basic health services to the vast majority of its can engage with hospital purchasing departments. Of
people.9 The Chinese government spent approximately course, a growing segment of the Chinese population
5 percent of GDP on healthcare in 2011, compared to has discretionary capacity to pay, which can potentially
roughly 18 percent spent in the US10 and 9 percent on be tapped through direct-to-consumer products – espe-
average in the OECD countries.11 Per capita spending cially imported health-related goods that are perceived
12
on medical technologies is just US$12 in China versus to be of higher quality than local alternatives.
US$399 in the US.13 Medical devices sales took off in China during the last
China’s centrally planned economy provides health decade, growing roughly 20 percent per annum17 and
insurance coverage to approximately 90 percent of the making China the world’s 4th largest medtech market
population under three primary programs (an employer- behind the US, Japan, and Germany. The industry is
based system, one for urban residents, and another currently estimated to be worth roughly US$17 billion.18
covering the rural population).14 These insurance Imported medical devices, primarily advanced

14
 China

technologies such as imaging equipment and implants The most effective way to understand formal and
that are targeted at top-tier hospitals in urban settings, informal systems within China, and how they interact,
account for over 60 percent of the market.19 Among the is by developing a strategic network of relationships
top 10 medical technology manufacturers in China, seven within the country. For example, when seeking regula-
are foreign firms or joint ventures. Domestic players have tory approval for a device in China, the official require-
tended to function on a regional basis, selling lower-tech ments of the China Food and Drug Administration
devices in markets outside the major cities. However, (CFDA) stipulate that a company’s first meeting with
notable exceptions are emerging in certain product cat- the agency take place after it makes its submission. How-
egories. Coronary stents were first introduced on a large ever, informal pre-submissions meetings with CFDA offi-
scale in China by some of the top five multinational med- cials, which help to clarify clinical requirements and
tech companies, and they rapidly captured 70–80 percent streamline the review process, can be arranged for com-
market share.20 Within a few years, however, local com- panies with the right relationships. Such connections are
panies launched mid-tier alternatives that they offered at built through years of time and effort. Companies
prices 30–40 percent lower than their multinational com- entering China for the first time almost always must hire
petitors. As a result, they quickly took over the market. consultants and other experts who can lend subject
Today, local stent manufacturers dominate the market on matter expertise as well as the right relationships to a
a national scale.21 Ultrasound machines provide another project.
example of a product category where majority market Product distribution is another challenging area,
share is rapidly moving from multinationals to local Chi- where companies are rarely successful without extensive
22
nese manufacturers. On the whole, local companies are relationship building. China’s diverse and distributed
increasingly consolidating their operations, augmenting population must be accessed province by province. And
their product pipelines with new and acquired products, each area has unique government policies, adaptation of
and making inroads into mid-tech device sectors. the centralized tender process, and other local require-
ments that make the notion of a national sales and distri-
Challenges bution model completely impractical in China. Moreover,
Compared to the growth prospects they contend with in contracts are awarded, sales are made, and products are
other markets, many healthcare companies consider adopted based on the relationships that exist between
China to be a “bright spot” in the global healthcare distributors and the facilities and physicians they serve.
landscape.23 Indeed the country is rich with opportun- As some multinational companies have learned the hard
ities, but it is not a market to be entered without consid- way, replicating these relationships is not only cost pro-
erable thought and planning. hibitive, but virtually impossible. As a result, it’s not
One of the most challenging aspects of working in uncommon for large medtech companies seeking the
China is navigating the formal rules set forth by regula- broad dissemination of its products to partner with as
tors and other government agencies in parallel with the many as 2,000 regionally focused distributors – a
informal norms that are integral to making progress in daunting and costly necessity of doing business in the
the country. Informal requirements and the precedents country.
set by other companies on their way to market are When developing in-country relationships, companies
powerful forces with which innovators must contend. should expect to find competing priorities and conflicting
However, it can be difficult for innovators to know what signals from the stakeholders in their networks. While
customary behaviors are expected and how to balance this is common in any geography, the types of tensions
them against more formal rules and guidelines. As one that arise in China, at times, can be more sensitive and
innovator described, very little related to doing business potentially difficult to reconcile. For example, in the
in China is “black and white,” but is instead character- country, there is a history of payments that flow directly
ized by “shades of gray.” from drug and device companies to physicians and

15
Global perspectives

hospitals.24 In the wake of a high profile scandal involv- strong relationships with distributors, hospital
ing a multinational drug company, the central govern- administrators, CFDA officials, and municipal and
ment launched a new anti-corruption campaign that it central government officials in order to understand
hopes will contribute to changes in the behavior of multi- and mitigate important risks and reduce the time and
national corporations (which are at risk of greater scru- cost of getting to market in China. If innovators do
tiny relative to in-country and global anti-bribery laws), not already have useful connections that can help
as well as the activities of local drug and device com- them build a network, they should make it a priority
panies.25 Efforts such as these may help eliminate some to partner with local experts and/or consulting firms
of the tensions that firms experience when doing busi- that are experienced at navigating the medical device
ness in China. development and commercialization process in
On a different note, the protection of intellectual prop- China. (See 2.3 Stakeholder Analysis and 5.7
erty (IP) and trade secrets in China poses significant Marketing and Stakeholder Strategy.)
concern for medtech companies. According to the US 2. Proactively erect competitive barriers. Start-up
Embassy in Beijing, China has one of the world’s highest companies often focus on intellectual property
piracy rates, with counterfeit goods accounting for over protection as the main barrier to entry for their
20 percent of products sold in the country.26 Inadequate competition. In China, however, patents are not
enforcement of international laws governing IP rights easily enforced. Successful companies create novel
and a protectionist instinct by the government combine barriers to protect their competitive position. For
to hinder efforts to reduce IP infringement.27 Foreign com- instance, the CFDA allows companies seeking
panies traditionally have not had much success seeking regulatory approval for novel, innovative products to
redress for infringement in Chinese courts. That said, generate their own product testing standard, which
enforcement and reparations are starting to improve can become the established standard for other
as Chinese companies increasingly find themselves the companies that may seek to develop “me-too”
victims of IP theft. Innovators should be wary of taking products. Innovators can use this opportunity to
easily copied innovations into the Chinese market, unless erect regulatory barriers to entry to slow fast
they can erect other barriers to protect their assets (as followers. Distributor partnerships and successful
described below). tender bids can also function as barriers to entry.
Innovators in China must think carefully about their
potential positional and capability-based advantages
Tactics
and use them to protect against competition. (See 5.9
China is the proverbial 800-pound gorilla that cannot
Competitive Advantage and Business Strategy.)
be ignored when considering global markets. The
3. Consider the pros and cons of being an outsider.
continuation of economic and demographic trends,
Innovators working in China sometimes perceive
health-related reform, improvements in infrastructure,
that they are at a disadvantage to domestic
and significant interest in innovation all provide real
competitors. For example, local firms may enjoy an
opportunities to medtech companies.28 Successful execu-
advantage in the Chinese tender process, and some
tion can be challenging but rewarding.
observers believe they are favored in the Chinese
Given the many unknowns associated with working in
courts when it comes to patent infringement
the Chinese market, innovators and companies with an
litigation. Domestic products can also follow a
interest in China are advised to remember that:
separate pathway for regulatory and reimbursement
1. Relationships are key. As described, having an approval in China that may be faster and less
active and extensive network is essential to complex than the pathways available to foreign
successfully conducting business in the country. manufacturers. On the other hand, products from
Innovators interested in entering China will need foreign multinational brands are often perceived as

16
 China

being higher quality than domestic products, which 10 “Health Expenditure Total (% of GDP),” World Bank, http://
allows them to command higher prices. Innovators data.worldbank.org/indicator/SH.XPD.TOTL.ZS (January
15, 2014).
should appreciate the advantages and disadvantages
11 OECD Health Data 2013 http://www.oecd.org/unitedstates/
to being an outsider working in China and take these
Briefing-Note-USA-2013.pdf (January 15, 2014).
factors into account in constructing a business 12 “Medical Device Market: China,” PRWeb, November 25, 2013,
strategy. (See 5.9 Competitive Advantage and http://www.prweb.com/releases/2013/11/prweb11367826.
Business Strategy.) htm (January 15, 2014)
13 “Medical Device Market: USA,” Espicom, February 19, 2014
(March 16, 2014).
Good luck! 好运
14 Blackburn, op. cit.
Christopher Shen
15 Ibid.
Executive Director, Singapore-Stanford Biodesign 16 “China’s New Health Plan Targets Vulnerable,” Bulletin of the
Consulting Assistant Professor of Medicine, Stanford World Health Organization, January 2010, http://www.who.
School of Medicine int/bulletin/volumes/88/1/10-010110/en/ (January 14, 2014).
17 Jamie Hartford, “The Medical Device Market in China,” Medical
Device and Diagnostic Industry, June 18, 2013 http://www.
mddionline.com/article/medical-device-market-china (January
NOTES
15, 2014).
1 “GDP Growth (Annual%),” The World Bank, 2012, http://data. 18 “Medical Device Market: China,” Reportbuyer.com press
worldbank.org/indicator/NY.GDP.MKTP.KD.ZG (March 14, 2014). release, November 25, 2013, http://www.prweb.com/releases/
2 “China: Health Data,” The World Bank, http://data.worldbank. 2013/11/prweb11367826.htm (January 15, 2014).
org/indicator/NY.GDP.MKTP.CD (January 10, 2014). 19 Hartford, op. cit.
3 Helen W. Wang, “The Biggest Story of Our Time: The Rise of 20 Nicholas Donoghue et al., “Medical Device Growth in Emerging
China’s Middle Class,” Forbes, December 21, 2011, http://www. Markets: Lessons from Other Industries,” In Vivo, June 2012,
forbes.com/sites/helenwang/2011/12/21/the-biggest-story-of- http://www.elsevierbi.com/publications/in-vivo/30/6/
our-time-the-rise-of-chinas-middle-class/ (January 15, 2014). medical-device-growth-in-emerging-markets-lessons-from-
4 “China: Data,” The World Bank, http://data.worldbank.org/ other-industries (February 12, 2014).
country/china (January 15, 2014). 21 Ibid.
5 “China Urban Population Exceeds Rural for First Time,” 22 Ibid.
Bloomberg News, Jan 17, 2012 (January 10, 2014). 23 Franck Le Deu, Rajesh Parekh, Fangning Zhang, and Gaobo
6 “Population Growth Rate,” The World Bank, 2012, hhttp://data. Zhou, “Health Care in China: Entering ‘Uncharted Waters,’”
worldbank.org/indicator/SP.POP.GROW?page=6 (March McKinsey & Company, November 2012, http://www.mckinsey.
14, 2014). com/insights/health_systems_and_services/
7 “Median Age of the Population in China, India, Europe, and USA health_care_in_china_entering_uncharted_waters (January
from 1950–2100,” China Profile Data, June 12, 2011, http:// 14, 2014).
www.china-profile.com/data/fig_WPP2010_Median-Age.htm 24 Andrew Jack and Patti Waldmeir, “GSK China Probe Flags Up
(January 10, 2014). Wider Concerns,” The Financial Times, December 17, 2013,
8 “China’s Aging Population to Double by 2053,” China Daily, http://www.ft.com/intl/cms/s/0/ba26aa2c-6648-11e3-aa10-
October 23, 2012, http://www.chinadaily.com.cn/china/2012- 00144feabdc0.html#axzz2qPYpCP7c (January 14, 2014).
10/23/content_15837794.htm (January 10, 2014). 25 Ibid.
9 Bradley Blackburn, “‘World News’ Gets Answers on China: 26 “Intellectual Property Rights in China,” American International
Health Care,” ABC News, November 18, 2010, http://abcnews. Education Foundation, http://www.aief-usa.org/ipr/ipr_facts/
go.com/International/China/health-care-china-trails-developed- index.htm (January 10, 2014).
countries-world-news/story?id=12171915&singlePage=true 27 “Intellectual Property Rights in China,” loc. cit.
(January 13, 2014). 28 Le Deu, Parekh, Zhang, and Zhou, op. cit.

17
Europe

Background services.10 When considering absolute amounts of

Europe, in geographic terms, comprises 47 independent healthcare spending per capita, the variation in health-
countries that jointly can be considered the largest econ- care spending is even more evident, ranging from about
1
omy on earth. The European Union (EU), as an econom- US$5,000 in France to merely US$500 in Romania.11
ically and politically integrated group of member states, Medical technology plays an important role in Europe,
includes 28 countries,2 with 18 of these sharing the euro both in terms of its use in clinical practice, as well as R&D
as their common currency.3 The EU member states have and manufacturing. In fact, approximately 7.5 percent of
a total gross domestic product (GDP) of more than US$16 total healthcare spending can be attributed to medical
trillion, with a per capita GDP of roughly US$34,000.4 In technologies.12 In 2012, Europe accounted for approxi-
terms of medical devices, the EU is often referred to as mately 30 percent of total global sales in medical technol-
the “European market” because of its common device ogy.13 In core countries of the European Union, including
regulation under the CE mark. However, innovators Germany, the United Kingdom, France, and Italy, utiliza-
should appreciate that the European market extends tion of innovative device technologies is often comparable
beyond the EU and includes such non-member states as to the United States. In fact, the EU often leads the US with
Switzerland and Norway. Russia, which geographically earlier medtech market introductions that are a result of
belongs to both Europe and Asia, is also commonly con- different regulatory systems in the two regions. Due
sidered part of the larger European medical device largely to different clinical data requirements for CE
market, as most of its economy and population is located marking, innovative devices are often commercialized in
in the western portion of the country. Europe first, receiving EU regulatory clearance years
Europe has a population of nearly 740 million people, ahead of FDA (US Food and Drug Administration)
approximately 7 percent of the global population (with approval, with resulting delays in US market introduction.
the current 28 EU member states accounting for 69 per- More than 60 percent of total EU medical technology
cent of the total).5 Compared to other parts of the world, sales come from its four largest countries (Germany 27
population growth in Europe is rather slow and the percent, France 16 percent, Italy 10 percent, and the UK
median age comparatively high. Nine of the top 10 coun- 11 percent).14 Germany, Ireland, Sweden, Finland, the
tries with the highest median age, worldwide, are Euro- Netherlands, and Belgium have a positive trade balance,
pean countries, with only Japan having an older exporting more medical technology than they import.15
population.6 Ireland has evolved into a major medical device hub in
Spending on healthcare as a percentage of GDP ranges Europe and hosts manufacturing sites for eight of the top
widely across European countries. France, Germany, the 20 medtech multinationals.16 Government tax incentives
Netherlands, and Denmark commit more than 11 percent for large corporations, a technically trained workforce,
of GDP to health, while Romania and Cyprus spend less and a budding start-up ecosystem are major contributors
than 6 percent.7 In 2010, health expenditures as a per- to Ireland’s success in medtech manufacturing.
centage of GDP dropped in the EU for the first time since
1975. From an annual average growth rate of 4.6 percent Germany
between 2000 and 2009, growth in health spending per Germany is Europe’s largest economy, with a GDP of
capita fell to –0.6 percent in 20108 and has been stagnant roughly US$3.4 trillion.17 It is the second most populous
in many countries ever since.9 Among EU member states, country in the region, behind Russia, with 82 million
those with higher average income levels per person people.18 Health insurance is compulsory for everyone
generally spend more on health-related products and living in Germany.19 For those earning less than

18
 Europe

approximately US$68,000 per year, insurance is provided largest healthcare systems in the world, the National
by the public statutory health insurance scheme (SHI), Health Service (NHS), a universal coverage, single payer,
known in Germany as Gesetzliche Krankenversicherung integrated healthcare delivery system.31 Through the
(GKV). The rest of the population has the option of NHS, residents of the UK automatically receive health-
purchasing private health insurance plans, although a care that is largely free at the point of use. The NHS, via
full 85 percent opts to remain with SHI.20 In Germany, its trusts, operates hospitals, doctor’s offices, and other
a strict separation exists between payers (insurances/ related health services delivery channels, and doctors,
sickness funds) and healthcare service providers, with nurses, and other care providers are directly employed
many hospitals and all doctors’ offices privately owned by the agency.32 The medical device market in the UK is
and operated. However, service fees are determined via valued at about US$11 billion, making it the third largest
bargaining processes between the major healthcare insti- in Europe.33 The UK market for medical devices is pro-
tutions.21 Germany is also Europe’s largest medical jected to increase by 7.3 percent per annum to about
device market (at US$27 billion) and the third largest in US$14 billion by 2018.34 The market is predominantly
the world behind the US and Japan.22 Medical technol- import-led, with only 25 percent of domestic demand
ogy is a key industry in Germany, with substantial met through in-country manufacturing.35 Overall, spend-
employment, the highest total sales among European ing cuts in healthcare and an increasing focus on value-
countries, and a significant export rate that continues to based pricing put substantial pressure on manufacturers
grow at approximately 12 percent per year.23 of devices and pharmaceuticals to drive down costs.

France Challenges
France is Europe’s second-largest economy, with a GDP While the EU’s regulatory system for medical devices has
24
of US$2.6 trillion. Similar to a number of other coun- long been touted as innovation-friendly, decisions
tries in Europe, the government bears the majority of the related to reimbursement and payment for new devices
healthcare expenditure, with private payments account- can be more challenging. Coverage must be negotiated
25
ing for less than 24 percent in 2013. Universal medical separately with payers in each country. Structured and
coverage (couverture maladie universelle, or CMU) was centralized processes exist in a number of countries,
introduced in 2000, and all residents receive publicly including the UK, France, and Germany. In other coun-
financed healthcare.26 Ninety-two percent of the popula- tries, coverage is often decided at the regional level (e.g.,
tion also has access to complementary or supplementary in Italy) or is handled through less formalized negotiation
health insurance through employers or the govern- processes between manufacturers and payers. This can
ment.27 The French healthcare system has been lauded be burdensome to medtech companies, especially start-
for providing high-quality care at less than half the per- ups, and also requires a clear strategic and tactical focus.
capita health spending level as the United States.28 The Medical device reimbursement is still considered
French medical device market, which is the second big- favorable in a number of European countries, and some
gest in Europe (at US$15 billion), is the fifth-largest med- useful pathways exist for “innovation” or add-on pay-
tech market worldwide.29 However, despite its attractive ments for devices. For instance, Germany’s NUB (Neue
size, France is known to be challenging when it comes to Untersuchungs-und Behandlungsmethoden) system pro-
device commercialization. Domestically, French medical vides a mechanism for hospitals to receive reimburse-
technology companies excel in producing highly ment for some newly introduced devices,36 even though
advanced devices such as implants.30 it can be challenging to obtain a positive decision. How-
ever, there is a growing trend across countries towards
United Kingdom more cost-conscious decision making and higher barriers
The UK is Europe’s third largest economy by GDP, at for reimbursement. This change is evidenced by the
approximately US$2.4 trillion. It is home to the one of the significant growth of health technology assessment

19
Global perspectives

(HTA) programs across Europe that focus on balancing earlier market access of new technologies compared to
the two major health system objectives of outcome the US, based on different regulatory requirements; the
improvement and cost control.37 The UK launched this focus in Europe is on the demonstration of safety and
movement by establishing the National Institute for performance, as opposed to safety and clinical effective-
Health and Care Excellence (NICE) in 1999. NICE has ness in the United States. Europe’s rapidly aging popula-
since implemented methodologically rigorous assessment tion and its distinct clinical needs present another
processes that inform reimbursement decision making significant opportunity for medtech innovation. Finally,
based on cost-effectiveness assessments. For medtech economic growth in a number of European countries that
companies, this means an early focus is necessary to had limited healthcare resources in the past is creating
appreciate and collect the clinical and cost evidence that new market opportunities. For instance, the Russian
is required to win a favorable reimbursement decision. medical device market has gained increasing attention
This is costly, and also leads to the exclusion of technolo- by multinational medtech companies in recent years
gies that do not demonstrate sufficient “value” in terms of because of its size and growth potential, and the willing-
the specific healthcare system’s willingness-to-pay. ness of a portion of the population to pay out-of-pocket
Another challenge is the strain the recent financial for innovative new devices and procedures. Device sales
crisis has put on the economies and financial budgets of in Russia, currently at US$6 billion, are estimated to
many European countries since 2008. This has led, as experience a six-fold increase by 2020.38
noted, to a number of European countries reducing and/ In preparing to tackle the European market, innovators
or slowing expenditures on healthcare. These cuts dir- and companies are advised to devote considerable atten-
ectly impact available spending on medical technology tion to the following issues:
and have already led to substantial pressures on medical
device sales prices. 1. Appreciate country-specific differences. While
Further, historical, political, and socio-economic Europe is often seen and referred to as one market,
factors, as well as national laws that govern healthcare it in fact is not. Each country has its own healthcare
system design, are explicitly excluded from harmoniza- delivery system and payment systems, mostly
tion per the EU treaty. This exclusion has contributed to governed by national laws. This leads to a variety of
maintained differences between the structures of health- differences between individual countries’ healthcare
care delivery systems. As a result, innovators must systems, ranging from differences in qualifications
appreciate that healthcare delivery and medical practices and responsibilities of healthcare staff, to variations
vary among European countries, with implications to the in patient referral and flow patterns, clinical
use of medical technology. In addition to these structural practice, and the medtech value chain. In addition,
differences, pronounced variations exist in cultures, atti- patient preferences and specific needs may differ
tudes, and languages across European countries, which based on cultural and historic distinctions among
add complexity to the implementation of a comprehen- member states. Innovators should therefore be
sive market entry strategy. prepared to conduct a thorough stakeholder and
clinical needs analysis, starting with the major
Tactics individual medtech markets in Europe, including
In addition to its substantive market size, Europe is Germany, France, the UK, and Italy. Also,
especially attractive to innovators because many of its innovators should anticipate dealing with a
countries have highly advanced healthcare systems with diversity of languages and local regulations, which
experienced clinicians that tend to be open to innovation can be burdensome and requires careful planning.
and commonly are early adopters of new medical tech- (See 1.2 Needs Exploration, 2.3 Stakeholder
nologies. This is further supported by Europe’s regula- Analysis, 2.4 Market Analysis, and 2.5 Needs
tory system for medical devices, which often facilitates Selection.)

20
 Europe

2. Be prepared to demonstrate value. As noted,

NOTES
Europe has been at the forefront of health
technology assessment efforts for the last two 1 “EU Position in World Trade,” European Commission, http://
decades. As a result, the focus on cost-effectiveness ec.europa.eu/trade/policy/eu-position-in-world-trade/ (March
and true value contribution of new technologies is 16, 2014).
much stronger in Europe than it is in the United 2 “List of Countries,” European Union, http://europa.eu/about-
eu/countries/index_en.htm (January 31, 2014).
States. Innovators should expect these assessments
3 “The Euro,” European Commission, Economic and Financial
and proactively seek to understand the technology
Affairs, http://ec.europa.eu/economy_finance/euro/ (January
assessment processes in their countries of interest 31, 2014).
and the types of clinical and economic evidence that 4 “European Union,” CIA World Factbook, Central Intelligence
is likely needed for their technologies. (See 5.3 Agency, https://www.cia.gov/library/publications/the-world-
Clinical Strategy, 5.6 Reimbursement Strategy, and factbook/geos/ee.html (February 14, 2014).
5 “European Population Compared with World Population,”
5.7 Marketing and Stakeholder Strategy.)
EuroStat November 2012, http://epp.eurostat.ec.europa.eu/
3. Leverage European activities for global market
statistics_explained/index.php/
entry. The current regulatory system in Europe, as European_population_compared_with_world_population
has been outlined, frequently facilitates earlier (January 31, 2014).
market entry than in the US. Innovators should 6 Ibid.
weigh the benefits such early market entry could 7 “Healthcare Statistics,” European Commission, Eurostat,
provide for the global commercialization of their September 2012, http://epp.eurostat.ec.europa.eu/
statistics_explained/index.php/Healthcare_statistics (February
technologies. Among these benefits are potential first
16, 2014).
revenues that can help a company’s bottom line.
8 “Health Spending in Europe Falls for the First Time in
But, more importantly, early market entry provides Decades,” OECD Newsroom, November 6, 2012, http://www.
opportunities to gain commercial experience with oecd.org/newsroom/
new products that can help to further improve and healthspendingineuropefallsforthefirsttimeindecades.htm
streamline the product offering. In addition, similar (February 16, 2014).
9 “Health Spending Continues to Stagnate, Says OECD,” OECD
to FDA approval, European CE marking is seen as a
Newsroom, June 27, 2013, http://www.oecd.org/els/health-
stamp of approval that can be highly useful when
systems/health-spending-continues-to-stagnate-says-oecd.htm
entering emerging markets. In fact, a number of (February 16, 2014).
countries, including India and some nations in Latin 10 “Healthcare Statistics,” op. cit.
America, provide substantially lower regulatory 11 “Health Expenditure per Capita,” The World Bank, 2013,
hurdles for products that already have obtained the http://data.worldbank.org/indicator/SH.XPD.PUBL (February
CE mark, or may even waive any further regulatory 13, 2014).
12 “The European Medical Technology Industry in Figures,”
requirements. The value of early European activities
MedTech Europe, 2013, http://www.eucomed.org/uploads/
for further US and foreign commercialization should
Modules/Publications/
therefore be considered in strategic decision making. the_emti_in_fig_broch_12_pages_v09_pbp.pdf, (January
(See chapters 4.2 Regulatory Basics, 5.2 R&D 31, 2014).
Strategy, 5.4 Regulatory Strategy, and 6.1 Operating 13 “Medtech Industry in Europe,” Eucomed, http://www.
Plan and Financial Model.) eucomed.org/uploads/Modules/Publications/
medtech_graphic_a2_130912_landscape.pdf (March 17, 2014).
14 “The European Medical Technology Industry in Figures,”
Good luck! Bonne chance! Viel Glück! Buona fortuna!
op. cit.
Buena suerte! 15 Ibid.
Jan B. Pietzsch 16 “Business in Ireland,” IDA Ireland, http://www.idaireland.
President and CEO, Wing Tech Inc. com/business-in-ireland/life-sciences-medical-tec/ (January
Consulting Associate Professor, Stanford University 27, 2014).

21
Global perspectives

17 “Germany,” The World Bank, http://data.worldbank.org/ 29 “Medical Device Market: France,” Espicom, 2014, http://www.
country/germany (February 13, 2014). espicom.com/france-medical-device-market (February
18 Ibid. 13, 2014).
19 David Green, Benedict Irvine, Emily Clarke, and Elliot Bidgood, 30 “France: Medical Device Industry,” Emergo Group, http://
“Healthcare Systems: Germany,” Civitas, 2013, http://www. www.emergogroup.com/resources/market-france (February
civitas.org.uk/nhs/download/germany.pdf (February 13, 2014). 21, 2014).
20 Ibid. 31 “The U.K. Healthcare System,” The Commonwealth Fund,
21 Ibid. 2013, http://www.commonwealthfund.org/Topics/
22 “What is Germany’s Secret? How the World Can Learn from a International-Health-Policy/Countries/United-Kingdom.aspx
Thriving Medtech Industry,” MMDI Online, May 30, 2012, (February 13, 2014).
http://www.mddionline.com/article/what-germany%E2% 32 Ibid.
80%99s-secret-how-world-can-learn-thriving-medtech-industry 33 “The Global Market for Medical Devices, 4th Edition,”
(February 13, 2014). Kalorama Information, May 2013, http://www.
23 “Industry Report Medtech 2013,” BVMed, March 2013, http:// kaloramainformation.com/Global-Medical-Devices-7546398/
www.bvmed.de/themen/medizinprodukteindustrie-1/CE- (March 10, 2014).
Kennzeichnung/article/2013-03-branchendarstellung-medtech- 34 “Medical Device Market: United Kingdom,” Espicom, 2014,
2013.html (February 13, 2014). http://www.espicom.com/uk-medical-device-market.html
24 “France,” The World Bank, http://data.worldbank.org/ (February 13, 2014).
country/france (February 16, 2014). 35 Ibid.
25 “France: Health Expenditure,” The World Bank, 2013, http:// 36 “ISPOR Global Healthcare Systems Roadmap,” International
data.worldbank.org/indicator/SH.XPD.PUBL (February Society for Pharmacoeconomics and Outcomes Research, April
13, 2014). 2011, http://www.ispor.org/htaroadmaps/germanymd.asp#4
26 “International Profiles of Healthcare Systems 2013,” (January 31, 2014).
Commonwealth Fund, 2013, http://www.commonwealthfund. 37 “Health Technology Assessment and Health Policy Making in
org/~/media/Files/Publications/Fund%20Report/2013/Nov/ Europe,” European Observatory on Health Systems and Policies
1717_Thomson_intl_profiles_hlt_care_sys_2013_v2.pdf Report, Studies Series No. 14, http://www.euro.who.int/
(February 13, 2014). __data/assets/pdf_file/0003/90426/E91922.pdf (January
27 Ibid. 31, 2014).
28 “Healthcare Lessons from France,” National Public Radio, 2008, 38 “Executive Guide to Doing Business in Russia,” Emergo Group,
http://www.npr.org/templates/story/story.php? January 2013, http://www.emergogroup.com/resources/
storyId=92419273 (February 13, 2014). market-russia (February 21, 2014).

22
India

Background surgery for less than US$2,000 per patient, with out-
South Asia is generally considered to include Afghani- comes similar to those at US-based centers where the
stan, Bangladesh, Bhutan, India, Maldives, Nepal, Paki- price tag can exceed US$100,000.11 Similar examples
stan, and Sri Lanka. Over the past 20 years, the region exist for ophthalmology, oncology, nephrology, and OB-
has experienced robust economic growth, averaging GYN specialty hospitals in India.12 Some of the success-
6 percent per year.1 As a result, poverty rates have ful strategies employed by these healthcare centers
declined, with the percentage of South Asians living on include generating high volumes of patients, aggressively
less than US$1.25 per day decreasing from 61 percent to trimming procedure costs, and shifting tasks to lower-
36 percent between 1981 and 2008. While the region is skilled care providers.13
still home to approximately 44 percent of the developing Health insurance coverage is still relatively uncommon
world’s poor, growth and development in South Asia are in India, but its availability is improving. Estimates vary,
expected to continue.2 but as much as 25 percent of the population now has
The largest and most influential country in the region some form of health insurance,14 although a much
is India. With approximately 1.3 billion people, India is smaller percentage has full or substantial coverage. Both
the fourth largest global economy by purchasing power government and private insurers are working to increase
parity (PPP).3 India’s gross domestic product (GDP) access to insurance. Analysts estimate that almost half
reached nearly US$2 trillion in 2012,4 and it is expected the population will enjoy some level of health insurance
to continue increasing at a healthy rate as the country coverage by 2020.15 The National Rural Health Mission
further integrates into the global economy. Growth will (NRHM), which the Indian government rolled out in
also be driven by increased domestic demand as India’s 2005, will account for some of this increase. NRHM is
burgeoning middle class expands from roughly 50 million an ambitious and wide-ranging public health program
in 2007 to almost 600 million people between by 2025.5 that seeks to improve healthcare delivery in rural India.16
India’s healthcare system is plagued by low spending The Rashtriya Swasthya Bima Yojna (RSBY, translated as
levels. Healthcare expenditure per capita was only US$59 National Health Insurance Program) also strives to
in 2011.6 The country’s private and public sector com- increase health insurance access for families below the
bined spent only about 4 percent of GDP on healthcare in poverty line.17
2011,7 although the government is planning to increase its The recent increase in individual purchasing power is
share from 1.4 percent to 2.5 percent of GDP over the next important given the relative lack of health insurance
five years. In the past half-century, India’s public sector
8
coverage in India. Patients make approximately 70 per-
has steadily given up market share to the private sector in cent of total healthcare payments in the country.18
providing healthcare.9 Accordingly to one study, the pri- Accordingly, they tend to be highly sensitive to both
vate sector accounted for over 90 percent of all hospitals, the cost and value of the medical interventions they
85 percent of doctors, 80 percent of outpatient care, and receive. Many Indians are willing to commit their family
10
almost 60 percent of inpatient care. savings to high-impact, life-saving medical interventions
Fortunately, India’s private sector has been respon- such as the implantation of pacemakers or stents, but
sible for some remarkable innovations in healthcare may only be willing to spend minimally to address health
delivery. Several major hospital systems in the country issues and chronic conditions that they perceive to be
are able to deliver high-quality outcomes at a fraction of “optional” or non-life-threatening.19
the cost of care in developed country settings. For India’s medical device market is conservatively worth
instance, one cardiac care center offers open-heart more than US$3 billion.20 It is forecast to continue

23
Global perspectives

expanding at a compounded annual growth rate of over produced less expensively and offered to Indian custom-
15 percent through 2016,21 far better than the 2 to 3 ers at more affordable prices.25
percent growth anticipated for the sector in the United To date, many multinational companies have focused
States and Europe. As a result, many global medical largely on making capital equipment, such as imaging
technology companies view India as one of the most equipment and incubators, available within India. In
promising emerging markets for direct investment.22 Sev- contrast, local medical technology companies have trad-
eral of the largest multinational companies in medical itionally concentrated on low-cost offerings such as med-
technology have invested in large product development ical supplies and consumables (sutures, catheters) that
centers in India to develop solutions suited for the local allow them to take advantage of inexpensive labor and
market. These product development centers are also cre- manufacturing costs but do not require extensive
ating examples of reverse innovation. For instance, some research and development.26
of these locally developed products, such as inexpensive State-of-the-art Indian secondary and tertiary care
blood glucose meters, have been launched in developed institutions, which attract both domestic patients who
markets with great success. can afford their world-class services as well as hundreds
Another factor affecting the demand for medical tech- of thousands of medical tourists each year,27 are benefit-
nologies in India is the growing prevalence of chronic ting from the innovative medical technologies that are
diseases, linked to increased longevity, greater urban- imported into the country. However, most of the Indian
ization, and shifting lifestyle choices within the popula- population is served by healthcare facilities without
tion. Communicable diseases such as malaria and adequate resources, staff, or capacity to access these
tuberculosis and tropical diseases such as Japanese products. And, unfortunately, the vast majority of
encephalitis and dengue fever traditionally represented imported medical technology products may not appropri-
a large proportion of India’s disease profile. However, ately address their needs. Some are too expensive to be
coronary heart disease, diabetes, asthma, and other made widely available. Others do not function depend-
chronic non-communicable diseases are significantly ably in areas with unreliable power or other infrastruc-
increasing in prevalence. For example, analysts pre- ture challenges. Still others may be too technically
dicted that Indians would account for some 60 percent complex or resource-intensive to operate or maintain
of the world’s heart patients by 2010.23 While this trend by healthcare workers who are under-trained relative to
poses challenges for the country’s healthcare system, it staff in top-tier facilities.
also presents significant opportunities for medical Although medical technologies are still largely under-
device companies with products that treat these condi- utilized across the country, India has developed a large,
tions. However, Indian patients will have to be con- well-established clinical trial industry led by the phar-
vinced of the value of paying for treatments to address maceutical industry. Clinical testing in the country can
such chronic conditions. be as little as one-twentieth the cost of conducting trials
elsewhere.28 However, at the time of this writing, new
Challenges restrictions put in place by the Indian Supreme Court
Despite the promise India offers as an emerging medical in 2013 have stalled most clinical trial activity in the
technology market, there are still relatively few examples country.29 These restrictions enforce stricter monitoring
of innovative medical technologies that have been and what critics perceive to be unreasonable require-
adopted on a large scale across the country. Imports from ments for compensating patients for research injuries or
medical technology companies dominate the medical death.30 The long-term effects of these changes remain to
technology sector, accounting for approximately 80 per- be seen, but some observers of the medical technology
24
cent of the value of all devices sold within India. Some and pharmaceutical industries anticipate that they will
companies have created products that are simplified ver- significantly reduce the number of trials conducted in
sions of products sold in Western markets that can be India and, in turn, the availability of new treatments.31

24
 India

Distribution is another variable in scaling the adoption ground clinical immersion is essential to
of innovative medical technologies beyond India’s pre- understanding India’s heterogeneous nature and
mium healthcare settings in large urban centers. Distri- what is truly required to more fully address the
bution networks for medical products are fragmented by needs of segments of its diverse population.
region, medical specialty, and product category. The dis- Investigate problems and opportunities across
tributors serve an important role in that they often have geographic regions (north, south, east, and west) –
deep relationships with healthcare providers, especially needs can be considerably different depending on
in areas of the country where sales representatives of the the area. The same applies for urban versus rural
medical device companies do not have relationships. settings, public versus private centers, and different
Further, distributors may extend credit with favorable socioeconomic classes. (See 1.2 Needs Exploration,
terms to smaller hospitals or physicians operating com- 2.4 Market Analysis, and 2.5 Needs Selection.)
munity clinics and surgery centers. 2. Go deep on stakeholder analysis. India’s
Equally as important as figuring out how to physically stakeholder landscape is significantly different than
sell and distribute a product in India, is devising a way to what innovators traditionally encounter in more
do so on a sustainable basis. Given the extreme require- developed markets. For instance, a low-skilled health
ment for more affordable medical technologies in the worker or a family caregiver in India may perform
country, innovators and companies often struggle if they procedures usually performed by a physician or
rely on traditional business models for generating skilled nurse in a developed market. Carefully
revenue. Accordingly, business model innovation – or understand the interests of all those involved in the
coming up with new and different ways to engage cycle of care, flow of money, and medical technology
with stakeholders in the healthcare value chain, align ecosystem to identify advocates and anticipate
their incentives, and realize a financial return – is becom- resistance. Pay attention to the many different levels
ing paramount to success in India’s medical technology of care providers, the multi-faceted medical
sector. The problem is that business model innovation is technology value chain, and to the extensive role of
difficult and can add considerably to the resource patients and their families in making care decisions.
requirements for a medical technology innovation (See 2.3 Stakeholder Analysis.)
project. 3. Keep innovating beyond the technology. With few
rules or precedents to follow, innovators have no
choice but to become creative; not just with the
Tactics
products they design and develop, but with the
The current market characteristics and barriers combine
business strategies they craft to support their
to make the Indian market a distinctive opportunity for
commercialization. Use your deep understanding of
medical technology innovation. Not only is the country’s
the need and the relevant stakeholders to enable
large and growing population in need of more inventive,
successful business model innovation, unique
appropriate solutions to common medical problems, but
partnerships, and other non-traditional approaches
products and services that work in India may also be
with the potential to overcome common barriers.
relevant in other markets such as Eastern Europe, the
And don’t be afraid to experiment. In India,
Middle East, and Africa.
creativity is a necessity that has spawned many
Innovators and companies choosing to target this
advances, such as financing schemes for more
market will face challenging conditions, to be sure. There
expensive interventions and mobile clinics and
are a few key issues related to the biodesign innovation
transport solutions to increase access to essential
process that deserve special emphasis:
medical services in remote rural areas, to name a
1. Search for needs in country. Don’t try to import few. (See 4.4 Business Models and 5.8 Sales and
needs (or their solutions) into the market. On-the- Distribution Strategy.)

25
Global perspectives

Good luck! गुड लक worldbank.org/en/news/2012/10/11/government-sponsored-

Rajiv Doshi, MD health-insurance-in-india-are-you-covered (February 22, 2013).
15 “Indian Pharma 2020: Propelling Access and Acceptance,
Executive Director (US), Stanford-India Biodesign
Realizing Potential,” McKinsey and Company, 2010, p. 18
Consulting Associate Professor, Stanford University
http://www.mckinsey.com/~/media/mckinsey/dotcom/
client_service/Pharma%20and%20Medical%20Products/PMP

NOTES %20NEW/PDFs/
778886_India_Pharma_2020_Propelling_Access_
1 “South Asia Overview,” The World Bank, http://www. and_Acceptance_Realising_True_Potential.ashx (March
worldbank.org/en/region/sar/overview (January 3, 2014). 7, 2014).
2 Ibid. 16 Deoki Nandan, “National Rural Health Mission: Turning into
3 “Country Comparison: GDP (Purchasing Power Parity),” The Reality,” Indian Journal of Community Medicine, vol. 35, no. 4,
World Factbook, Central Intelligence Agency, 2012, https:// 2010, pp. 453–4. http://www.ncbi.nlm.nih.gov/pmc/articles/
www.cia.gov/library/publications/the-world-factbook/ PMC3026119/ (March 7, 2014).
rankorder/2001rank.html?countryname=India&countrycode= 17 Nagesh Prabhu, “Rashtriya Swasthya Bima Yojana for BPL
in&regionCode=sas&rank=4#in (January 3, 2014). families too,” The Hindu, July 8, 2013, http://www.thehindu.
4 “GDP (Current US$),” The World Bank, 2012, http://data. com/news/national/karnataka/rashtriya-swasthya-bima-
worldbank.org/indicator/NY.GDP.MKTP.CD (January 3, 2014). yojana-for-bpl-families-too/article4892098.ece (March 7, 2014).
5 “Taking Advantage of the Medtech Market Potential in India,” 18 “Health Financing: Private Expenditures on Health as a
PricewaterhouseCoopers, 2012, pg. 4 http://www.pwc.com/ Percentage of Total Expenditures on Health,” World Health
mx/es/industrias/archivo/2012-09-taking-advantage-india.pdf Organization, 2011, http://gamapserver.who.int/gho/
(January 3, 2014). interactive_charts/health_financing/atlas.html?
6 “Health Expenditure Per Capita” The World Bank, 2012, http:// indicator=i2&date=2011 (October 2, 2013).
data.worldbank.org/indicator/SH.XPD.PCAP (March 14, 2014). 19 “Taking Advantage of the Medtech Market Potential in India,”
7 “Health Expenditure, Total (% of GDP),” The World Bank, op. cit.
2012, http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS 20 Ibid.
(February 14, 2014). 21 “Medical Devices Market in India May Grow to $5.8 Billion by
8 “Healthcare Spending to Rise to 2.5 Percent,” Indian Express, 2014: Report,” BioSpectrum, October 3, 2013, http://www.
March 1, 2012, http://www.indianexpress.com/news/ biospectrumasia.com/biospectrum/news/197400/medical-
healthcare-spend-to-rise-to-2.5-of-gdp/918380 (March 7, 2014). devices-market-india-grow-usd58-billion-2014-report#.
9 Ramya Kannan, “More People Opting for Private Healthcare,” UxoIqPldV8E (March 7, 2014).
The Hindu, August 1, 2013, http://www.thehindu.com/sci- 22 “Taking Advantage of the Medtech Market Potential in India,”
tech/health/policy-and-issues/more-people-opting-for-private- op. cit.
healthcare/article4967288.ece (March 7, 2014). 23 David Kohn, “Getting to the Heart of the Matter in India,” The
10 “Private Sector in Healthcare Delivery in India,” National Lancet, August 16, 2008, http://www.thelancet.com/journals/
Commission on Macroeconomics and Health, 2005, pg. 5 lancet/article/PIIS0140-6736(08)61217-9/fulltext (January
http://www.who.int/macrohealth/action/Report%20of% 3, 2014).
20the%20National%20Commission.pdf (March 7, 2014). 24 “India Medical Device Consulting,” Pacific Bridge Medical,
11 Ketaki Ghokhale, “Heart Surgery in India for $1,583 Costs http://www.pacificbridgemedical.com/business-services/
$106,385 in U.S.,” Bloomberg News, July 28, 2013, http:// medical-device-consulting/india/ (January 3, 2014).
www.bloomberg.com/news/2013-07-28/heart-surgery-in- 25 “Taking Advantage of the Medtech Market Potential in India,”
india-for-1-583-costs-106-385-in-u-s-.html (February 12, 2014). op. cit.
12 Vijay Govindrajan and Ravi Ramamurti, “Delivering World- 26 “The Medical Device Market: India,” op. cit.
Class Healthcare Affordably,” Harvard Business Review, 27 “Stricter Rules Driving Away Medical Tourism from India,” The
November 2013, http://www.aravind.org/ Economic Times, August 15, 2013, http://articles.
aravindcontentmanagement/file/MF00000053.pdf (February economictimes.indiatimes.com/2013-08-15/news/
12, 2014). 41413559_1_apollo-hospitals-prathap-c-reddy-overseas-
13 Ibid. patients (October 3, 2013).
14 “Government Sponsored Health Insurance in India: Are You 28 Kenan Machado, “New Restrictions Stall Drug Trials in India,”
Covered?,” The World Bank, October 11, 2012, http://www. Wall Street Journal India, January 28, 2014, http://blogs.wsj.

26
 India

com/indiarealtime/2014/01/28/new-restrictions-stall-drug- Participants,” British Medical Journal, July 2013, http://www.

trials-in-india/ (February 14, 2014). bmj.com/content/347/bmj.f4841 (January 2, 2014).
29 Dinsa Sachan, “Supreme Court Ruling Brings Clinical Trials to a 31 S. Seethalakshmi, “Foreign Companies Stop Clinical
Halt in India,” Chemistry World, October 15, 2013, http://www. Trials in India After Government Amends Rules on
rsc.org/chemistryworld/2013/10/supreme-court-ruling- Compensation,” The Times of India, August 1, 2013, http://
clinical-trials-halt-india (February 14, 2014). articles.timesofindia.indiatimes.com/2013-08-01/bangalore/
30 Jeremy Sugarman, Harvey M. Meyerhoff, Anant Bhan, Robert 40960487_1_clinical-trials-iscr-suneela-thatte (February
Bollinger, Amita Gupta, “India’s New Policy to Protect Research 14, 2014).

27
Japan

Background 70 percent of the country’s hospitals have CT scanners

At nearly US$6 trillion, Japan has the third largest gross and Japan has the most MRI machines among the
domestic product (GDP) in the world, after the US and Organization for Economic Cooperation and Develop-
1
China. Real GDP grew at about 1.9 percent in 2012, and ment (OECD) countries.12 Still, the country commits
it is projected to expand at roughly one percent per year 9.3 percent of its GDP to healthcare compared to 17.9
through 2020.2 The Japanese economy was badly hit by percent in the US.13
the global recession in 2008–2009 and the massive tsu- Japan finances the delivery of healthcare through a
nami in 2011, and it continues to suffer from persistent universal health insurance system that has three primary
deflation. Japan’s economy has been led by the advanced parts: (1) Employees’ Health Insurance for employed
manufacturing sector, which generates strong export individuals and their families; (2) National Health Insur-
activity. However, the country is looking to bolster ance for the self-employed and poor; and (3) Late-Stage
domestic demand in order to drive increased growth.3 Medical Care System for individuals over 75 years of age.
The population of Japan, at more than 128 million The result is that nearly all residents are covered by
people, is decreasing about 0.2 percent each year. 4
insurance. People insured under the first two categories
Trends indicate that the country’s total inhabitants will are responsible for copayments equal to 30 percent of
decline by almost 30 percent by 2060 due to a low birth- their care, up to a maximum limit. The elderly pay 10
rate, limited immigration, and an aging population.5 percent, up to a maximum limit (unless their income
Approximately 23 percent of the Japanese people were is equivalent to an active worker). Expenses over the
over 65 years of age in 2012; by 2060, more than 40 per- defined limits are paid for by the government. In total,
cent of the population will be senior citizens.6 As the roughly 82 percent of health spending is funded by public
population ages, cancer, heart disease, and pneumonia sources.14 The government uses regulation of the coun-
have become the country’s leading causes of death.7 try’s hospitals, which are mostly private, to ensure that
The Japanese universal healthcare system, known as access and the quality of care remains universal and egali-
kaihoken, has been lauded for increasing the quality of tarian.15 And although the government carefully regulates
life of the Japanese people and is cited as a key reason healthcare financing and the country’s insurance system,
the Japanese have the longest life expectancy in the patients enjoy great freedom of choice in which doctors
world.8 However, increasing healthcare costs, in combin- they see, and physicians and other medical professional
ation with the country’s rapidly aging population and are generally in control of the delivery of care.
slow-growth economy, are creating the need for reforms Japan is the second largest medical technology market
and cost cutting.9 Japanese patients tend to visit phys- in the world, behind only the US. It is the third largest
icians more frequently than their counterparts in the US importer of medical equipment (after the US and Ger-
(13.2 versus 3.9 appointments per person per year). And many) and the eighth largest medical device exporter in
their hospitals stays are significantly longer (18.8 versus the world.16 At US$31 billion,17 Japan accounts for about
5.5 days). Japan also has three times as many acute care 10 percent18 of global medtech sales. Some multinational
hospital beds per 1,000 people (8.1 versus 2.7).10 More- medical device companies have a presence in Japan, and
over, Japanese expenditures on medical devices are the many Japanese companies are aggressive players in the
highest in Asia at US$165 per capita, compared to just global medtech market themselves. Many of these com-
US$10 per capita in China.11 To date, Japan has main- panies, such Toshiba, Hitachi, and Fuji Film have
tained one of the most technologically advanced health- entered the medical field from the high-technology and
care systems in the world. For instance, more than electronics sectors. Japanese firms tend to be stronger in

28
 Japan

diagnostic devices, particularly imaging, while most since 2009, aspects of the approval process have been
innovative therapeutics are imported. clarified, and more frequent consultation on regulatory
submissions is now allowed. However, despite these
Challenges changes, PMDA remains understaffed. In addition,
Although Japan is a large, stable market that is receptive review times for priority devices are only just catching
to advanced technology, it is frequently considered to be up to the US FDA, while non-priority devices can take up
the most difficult Asian market to enter.19 Many innov- to 2 years longer.20 Such barriers have led to a well-
ators are challenged by the language barrier since not all documented “device lag” that delays product launches
forms and guidelines are readily available in other lan- in the country and prevents Japanese patients from bene-
guages. They also may find certain processes to be com- fiting from the world’s most advanced diagnostics and
plex and laden with “hidden” costs. For instance, to help devices in a timely manner.
them navigate the path to market, foreign companies An additional factor that can make Japan a difficult
must engage with a Marketing Authorization Holder environment for medtech innovation is that the country
(MAH). In addition to assisting with the regulatory pro- does not have a strong history of entrepreneurship in the
cess, the MAH helps facilitate distribution, which typic- healthcare sector. Japan’s leading examples of entrepre-
ally involves a primary distributor that works through a neurship exist almost exclusively in high-technology.
network of secondary distributors. Each of these external Culturally, Japanese society is still not widely accepting
parties must be managed, and also requires a commis- of mistakes and failure, which discourages the risk-
sion on product sales. Similarly, when conducting clin- taking behavior that is required to create start-up com-
ical trials in Japan, physicians tend to be less directly panies. The country is admired for its commitment to
involved in data collection than their counterparts in the research and development, devoting a higher percentage
US and Europe, and experienced clinical research coord- of GDP to this activity than all other countries except
inators are scarce. Accordingly, companies often must Israel.21 Yet, relatively few Japanese innovations are
depend on contract research organizations (CROs) to transformed into viable businesses.22 Of those individ-
play a much more active, hands-on role in their Japanese uals and teams that do decide to launch new companies,
trials, incurring significantly higher costs in the process. most have a tendency to “play it safe” by pursuing incre-
These costs are offset to some extent by the relatively mental improvements and “me too” technologies.
high reimbursement rates traditionally authorized by Regardless, they often have difficulty recruiting engineer-
Japan’s Ministry of Health, Labour, and Welfare. How- ing talent, as few people are willing to leave large, stable
ever, this entity is working to bring reimbursement in organizations to join a start-up. As a result, in-country
Japan into closer alignment with reimbursement levels in medtech innovators have trouble finding experienced
the US. It has also has begun reevaluating payment levels mentors to help guide them. Innovators and companies
for medical devices every two years as part of its cost seeking to enter Japan with innovative new medical
reduction efforts. These activities will diminish this products also feel the effects of this problem. With few
advantage to companies over time. start-ups founded within the country and many larger
Device regulation through the country’s Pharmaceut- organizations able to leverage partnerships and resources
icals and Medical Devices Agency (PMDA) provides developed in the high-tech and electronic sectors, the
another example of where companies often struggle. This medtech ecosystem in Japan is still in its infancy.
agency traditionally has been known for its rigid stand-
ards, lengthy approval processes, and requirements for Tactics
extensive documentation. The PMDA recently enacted A survey conducted by the American Medical Devices
reforms focused on encouraging medtech innovation and Diagnostics Manufacturers’ Association (AMDD)
and decreasing the time to approval for novel devices. revealed that 85 percent of Japanese people desire faster
The number of reviewers at the PMDA has been tripled access to the world’s most advanced medical

29
Global perspectives

technologies, and 66 percent of respondents indicated almost all innovative devices are able to secure local
that they favor these technologies even if they cost reimbursement within three to six months following
slightly more.23 The government is also supportive, PMDA approval. (See 4.2 Regulatory Basics and 5.4
having recently established an Office for Health Care Regulatory Strategy.)
and Medical Strategy that is focused on helping drive 3. Getting down to business can be burdensome.
the development and commercialization of more medical Medtech specific activities such as filing a patent,
technologies from the country’s investment in R&D. The running clinical trials, and seeking regulatory
prime minister has further designated the medtech approval can all require additional effort and
industry as one of three strategic sectors that will revital- expense when working in Japan. In addition, Japan
ize the country’s economy. Against this backdrop, Japan is ranked 122 out of 189 economies when it comes to
is ripe for medtech innovation from outside and within. the time and cost involved in launching a business in
In preparing to tackle the Japanese market, innovators the country.25 In combination, innovators must take
and should pay specific attention to these factors: these factors into account as they develop their plans
and timelines to get to market, and also as they
1. Credibility matters. In Japan’s hierarchical society,
prepare to raise the funding necessary to support
it can be difficult for innovators and start-up
their in-country efforts. (See 6.1 Operating Plan and
companies to make progress on multiple fronts
Financial Model and 6.3 Funding Approaches.)
without the support or involvement of a well-known
doctor, leading academic connection, or strong Good luck! 幸運
corporate and/or government backing. The Fumiaki Ikeno
repercussions of this issue are felt throughout the Research Associate, Cardiovascular Medicine, Stanford
biodesign innovation process, from gaining access to University
hospitals and physicians, through identifying sources Global Product Development Partnership (PDP) Liaison,
of funding. Innovators with prestigious in-country Stanford Biodesign
connections should actively seek to leverage them.
While there is no easy solution for those without,
NOTES
they should anticipate potential resistance and think
creatively about workarounds until they are able 1 “Japan Indicators,” The World Bank, 2012, http://data.
to build desired relationships. (See 2.3 Stakeholder worldbank.org/country/japan (January 14, 2014).

Analysis and 5.7 Marketing and Stakeholder 2 “Japan GDP Growth Forecast 2013–2015,” Knoema, 2013 http://
knoema.com/igsdjtg/japan-gdp-growth-forecast-2013-2015-and-
Strategy.)
up-to-2060-data-and-charts (January 14, 2014).
2. When it comes to regulation, plan ahead. Given the
3 “Japan Overview,” Encyclopedia of the Nations, http://www.
Japanese device lag, begin thinking about an in- nationsencyclopedia.com/economies/Asia-and-the-Pacific/
country regulatory strategy relatively early. Choosing Japan-OVERVIEW-OF-ECONOMY.html (January 14, 2014).
the right MAH is essential to the regulatory process, 4 “Japan Indicators,” The World Bank, 2012, http://data.
so innovators should seek referrals and screen these worldbank.org/country/japan (January 14, 2014).
5 “Japan’s Population Logs Record Drop,” CBC News, January 2,
prospective partners carefully. Additionally,
2013, http://www.cbc.ca/news/world/story/2013/01/02/
innovators are advised to take advantage of the many
japan-population-record-decline.html (January 14, 2014).
consultation sessions offered by PDMA. These 6 Ibid.
meetings can be costly (up to US$28,000 for a two- 7 “Causes of Death,” Japanese Ministry of Health Data, http://
hour meeting), but the feedback is reliable, making www.mhlw.go.jp/toukei/saikin/hw/jinkou/geppo/nengai11/
24 kekka03.html#k3_2 (January 14, 2014).
the sessions a valuable investment. Although
medtech regulation in Japan can be a challenge, the 8 “Healthcare in Japan,” The Economist, September 12, 2011,
http://www.economist.com/node/21528660 (January
good news is that review times are getting shorter and
14, 2014).

30
 Japan

9 Meredith Milnick, “Japanese Longevity – How Long Will It kaloramainformation.com/Global-Medical-Devices-7546398/

Last?,” Time, September 5, 2011, http://healthland.time.com/ (March 10, 2014).
2011/09/05/japanese-longevity-%E2%80%94-how-long-will- 18 Miki Anzal, “Japan’s Medical Device Market is Getting Better,”
it-last/ (March 14, 2014). European Medical Device Technology, November 2012, http://
10 Hideki Hashimoto, Naoki Ikegami, Kenji Shibuya, Nobuyuki www.emdt.co.uk/article/japan%E2%80%99s-medical-device-
Izumida, Haruko Noguchi, Hideo Yasunaga, Hiroaki Miyata, market-getting-better (January 14, 2014).
Jose M. Acuin, and Michael R. Reich, “Japan: Universal Health 19 Ames Gross, “PMDA Consultation Sessions for Medical Device
Care at 50 Years,” The Lancet, August 30 2011, http://www. Registration in Japan,” Pacific Bridge Medical, April 4, 2013,
thelancet.com/journals/lancet/article/PIIS0140-6736(11) http://www.pacificbridgemedical.com/publications/pmda-
60987-2/abstract (March 17, 2014). consultation-sessions-for-medical-device-registration-in-japan/
11 “Medical Device Market: Japan,” Pacific Bridge Medical, http:// (January 29, 2014).
www.pacificbridgemedical.com/business-services/medical- 20 Ibid.
device-consulting/japan/ (January 14, 2014). 21 “Medical Technology Innovation Scorecard: The Race for
12 “OECD Health Data 2013: How Does Japan Compare?,” Global Leadership,” PricewaterhouseCoopers, January 2011,
Organization for Economic Cooperation and Development, http://download.pwc.com/ie/pubs/2011_medical_
June 2013, http://www.oecd.org/els/health-systems/Briefing- technology_innovation_scorecard_the_race_for_global_
Note-JAPAN-2013.pdf (January 14, 2014). leadership_jan.pdf (January 14, 2014).
13 “Health Expenditure, Total (as% of GDP), The World Bank 22 Michael Fitzpatrick, “Japan: Where Medical Miracles Are
2011, http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS Waiting to Get Out of the Lab,” CNN Money, April 8, 2013, http://
(March 14, 2014). tech.fortune.cnn.com/2013/04/08/where-medical-miracles-
14 “OECD Health Data 2013: How Does Japan Compare?,” are-just-waiting-to-get-out-of-the-lab/ (January 14, 2014).
op. cit. 23 “AMDD Announces Japan Advanced Medical Device and
15 Kavitha A. Davidson, “The Most Efficient Health Care Systems Diagnostics Public Opinion Survey Results,” American Medical
in the World,” The Huffington Post, August 28, 2013, http:// Devices and Diagnostics Manufacturers’ Association, December
www.huffingtonpost.com/2013/08/29/most-efficient- 17, 2010, http://www.amdd.jp/en/technology/press101217.
healthcare_n_3825477.html (January 14, 2014). html (January 14, 2014).
16 “Medical Device Market in Japan,” Espicom Reports, 2012, 24 Gross, op. cit.
http://www.espicom.com/japan-medical-device-market 25 “Starting a Business in Japan,” International Finance
(January 14, 2014). Corporation and The World Bank, http://www.doingbusiness.
17 “The Global Market for Medical Devices, 4th Edition,” org/data/exploreeconomies/japan/starting-a-business/
Kalorama Information, May 2013, http://www. (January 17, 2014).

31
Latin America

Background represent small markets for medical devices. Argentina

Latin America includes approximately 20 countries in and Venezuela have demonstrated a higher demand for
North, South, and Central America and the Caribbean. medical technologies, yet both countries are experien-
In contrast to most of the United States and Canada, Latin cing serious macroeconomic challenges that are
languages – mainly Spanish and Portuguese – are primar- hindering continued medtech expansion.13
ily spoken in the region.
While economic growth varies substantially across Brazil
Latin America, the gross domestic product (GDP) growth Brazil is the region’s heavyweight, with the largest popu-
in the region as a whole increased by an average of lation (199 million people), the biggest geographic foot-
5 percent from 2000 to 2008,1 and decreased to closer print, and largest economy (US$2.2 trillion in 2012).14
to 3 percent subsequently.2 Brazil and Mexico are the The country’s economic growth has created a large
largest economies, accounting for roughly 65 percent of middle class, with the number of people living below
region’s combined GDP.3 Globally, Brazil and Mexico the national poverty line declining from 21 percent in
4
have the 7th and 14th largest GDPs, respectively. 2003 to 11 percent in 2009.15 The disease profile of
Economic gains have stimulated increases in consump- population is dominated by chronic diseases, such as
tion, population, and longevity, as well as more demand cancer and cardiovascular disease.16
for adequate healthcare by a growing middle class. This, The Brazilian government provides universal health-
in turn, has led to enhanced opportunities in the public care coverage to approximately 75 percent of its citizens
and private healthcare markets and increased investment under the Unified Health System (Sistema Unico de
in healthcare access and infrastructure. Concurrently, Saúde – SUS)17 and spends about 9 percent of GDP
Latin America has experienced a rise in the prevalence (or US$1,121 per capita) on healthcare.18 In 2010, the
of chronic diseases across the region. Mortality due to Ministry of Health launched the “More Health” (Mais
cardiovascular diseases alone is predicted to increase by Saúde) initiative, a healthcare program that targets the
145 percent between 1990 and 2020.5 Healthcare expend- strengthening of the SUS by extending healthcare cover-
iture per capita in the region hovers around US$661,6 age and improving quality and access. Alongside the
compared to approximately US$8,600 in the United SUS, Brazil also has the second largest private health
States,7 suggesting future room for expansion . insurance sector in the Americas. Over 1,200 insurers
As a whole, Latin America has a medical technology provide supplementary medical coverage to approxi-
industry valued at more than US$8 billion, which makes mately 25 percent of the population, with services
it one of the larger global markets.8 Moreover, medical typically purchased by middle and upper income house-
device sales have been expanding at a rate of more than holds.19 The Agência Nacional de Saude Suplementar
10 percent per year in the region.9 Based on their size, (ANS) regulates the supplementary healthcare sector
Brazil and Mexico comprise the most important medical and healthcare plans have a mandatory obligation to
device markets in Latin America and, accordingly, will be pay for inpatient drugs and medical devices that are part
covered in more detail below. However, Colombia has of the statutory list, but are not required to cover drugs
the fastest growing medtech market, with a projected and medical products dispensed by retail pharmacies.
2013–2018 compound annual growth rate of 13.3 per- Brazil is the largest medical device market in Latin
cent. This market is forecast to reach US$2.2 billion in America, with revenues of about US$6 billion in 2012.20
2018.10 Chile and Peru are among the region’s top eco- The country has a relatively well-established medical
nomic performers,11,12 but both of these countries technology industry that includes both local and

32
 Latin America

multinational companies. The local companies mostly Baja California. The domestic medtech industry in
manufacture low-to-mid complexity, less expensive med- Mexico is geared towards exports, with the United States
ical devices, while most high-end, expensive devices are as the dominant destination. The local markets, on the
imported. Medical devices are regulated by the Brazil other hand, are predominantly supplied by imports. In
national health surveillance agency called Agência Nacio- combination, these factors make Mexico both the leading
nal de Vigilância Sanitária (ANVISA), which has require- medical device exporter and importer in Latin America.29
ments similar to those found in the European Union. The Mexican regulatory agency, Subsecretaría de Regu-
lación y Fomento Sanitario of the Secretaría de Salud
Mexico (SSA), through a division known as COFEPRIS, follows
Mexico is the largest Spanish-speaking country in the similar guidelines to the US FDA and works in cooper-
world, with a population of about 121 million people.21 ation with that agency.30
With a GDP of US$1.1 trillion, it has the second largest
economy in the region.22 Its proximity to the United Barriers
States makes it an attractive market for many medtech Economic growth and development in Latin America has
companies. Health expenditure is low compared to other been undeniably robust over the last decade, making it a
Latin American countries – the World Bank estimates compelling geographic target for medtech innovators.
that Mexico spends 6.3 percent of GDP on healthcare,23 However, as with any emerging market, the region is not
with public expenditure accounting for about 50 percent without its challenges. For one, the countries that comprise
of the total.24 Most private spending is out-of-pocket, as Latin America are incredibly diverse, offering significantly
private insurance companies represent a small propor- different levels of opportunity, stability, productivity, and
tion of the healthcare market.25 competitiveness to the companies that do business within
Healthcare provision varies widely across Mexico. The them. On the World Economic Forum’s 2013–24 Global
largest public hospitals and private facilities are generally Competitiveness Index, Chile was a top performer, ranked
well equipped and staffed, with private hospitals in 34th out of 148 countries, while Venezuela received the
Mexico City catering to upper-middle class locals and lowest ranking at 134th (Mexico and Brazil earned the 55th
medical tourists. However, the country’s overall hospital and 56th positions on the report).31
infrastructure is underdeveloped, with only one hospital Despite this wide-ranging performance, many coun-
bed per 1,000 people in 2013, less than half the rate of tries in Latin America struggle with common factors that
provision in Argentina, Brazil, or Chile.26 Smaller, more limit their competitiveness by international standards.
remote facilities are in great need of upgraded and For example, multiple countries within the region,
expanded equipment. including Brazil and Mexico, have persistent problems
Mexico is the second largest medical device market in related to the overall quality of their physical infrastruc-
Latin America, at about US$4 billion.27 It has become an tures. Government efficiency, corruption, and security
important medical device manufacturing base for multi- are also common concerns.32 Another important issue
nationals due to its Maquiladora program, under which relates to the smooth, transparent functioning of many
manufacturers can bring in components, parts, or even major institutions, including the regulatory bodies that
capital equipment from the US free of import duties due play a critical role in the medtech field. Brazil and Mexico
to the North American Free Trade Agreement have the most mature and stable regulatory systems in
(NAFTA).28 Geographical proximity to the United States the region, but requirements for market entry can still be
and a less expensive cost of labor encourages many somewhat confusing and excessively bureaucratic. For
American medical device companies to set up manufac- instance, gaining regulatory approval in Brazil through
turing facilities in Mexico or use third-party manufactur- ANVISA can take from six months to two years, with
ing services provided by local companies. Maquiladora unexplained delays often slowing licensing, registration,
activity concentrates along the US border in the state of and review processes.33 According to one report,

33
Global perspectives

bureaucracy and corruption costs Brazil over US$40 bil- destination, and they should keep these three inter-
lion each year.34 related factors in mind when doing so:
Intellectual property (IP) protection is another area
where Latin America’s institutions have room for continued 1. Conduct an in-market experiment. Innovators who
improvement. In contrast to the United States and Europe, are uncertain whether Latin America is the right
Latin America does not have a longstanding tradition of market to enter with a product should consider
protecting IP rights. In recent years, the region has made gaining some experience in the region before making
significant strides in adopting legal reforms and aligning its up their minds. For example, Argentina, Brazil, and
IP policies with those advocated by international agencies Chile have developed vibrant industries focused on
such as United States Patent and Trademark Office, the conducting clinical trials for pharmaceutical and
European Patent Office, and the World Intellectual Property medical device companies from around the world.
Organization. However, piracy and enforcement remain The advantages of conducting trials in the region
ongoing challenges.35 In some countries, other hurdles include lower costs, faster enrollment, rates strong
exist. For example, in Brazil, any patent application for patient retention, competent and enthusiastic
products affecting “public health” must first be approved investigators, and compliance with Good Clinical
by ANVISA before it can be examined on its merits by the Practices (GCPs).42 Similarly, locations such as
in-country patent office. This extra requirement, known as Mexico are well known for their medtech contract
“prior consent,” can add significant time, cost, and risk to manufacturing capabilities. Baja California alone has
the patent applications of pharmaceutical and medical tech- more than 65 facilities devoted manufacturing ISO,
nology companies.36 Other Latin American countries such FDA, and CE-mark certified medical devices.43 Costa
as Paraguay also follow prior consent rules.37 Rica is another manufacturing hub, with medtech
Finally, Latin America suffers from uneven quality in exports expanding at a compound annual growth
its educational systems, which contributes to a scarcity of rate of 24 percent since 1998. Products produced in
skilled workers in high technology fields such as medical the country range from high-tech devices for
device development. This, in turn, limits the extent of multinationals to low-end disposables.44 Starting
innovation being generated from within the region. For with a small trial or manufacturing project can be an
instance, despite a thriving medical device manufactur- effective way to gain exposure to Latin America and
ing sector in Mexico,38 few domestic companies are begin cultivating relationships in markets that may
developing innovative medical solutions specifically for be of interest at a later date. (See 5.2 R&D Strategy
the Latin American market. Similarly, entrepreneurship and 5.3 Clinical Strategy.)
is an important driver of the economy – small businesses 2. Establish a beachhead from which to expand.
employ over half of all workers. But these businesses When innovators are ready to tackle Latin America
often fail to grow into large, sustainable enterprises.39 as a market, thinking about the region as a whole
can be intimidating. A more effective approach is to
Tactics establish a foundation in a single market from which
Large multinational corporations have been selling med- the company can grow. Brazil or Mexico, with their
ical technologies in Latin America for more than 50 large economies and more established medical
years, but relatively few start-ups have targeted the device markets, can serve as an excellent starting
region with their offerings.40 Latin America is large, point. For US-based innovators, Mexico offers great
growing, and full of opportunity. And, according to proximity, regulatory requirements that are
some, it may be a less complicated, more approachable becoming harmonized with those of the FDA, and a
market for young medtech companies to enter than other base from which to enter other Spanish-speaking
emerging markets, such as China.41 Innovators are well countries.45 Brazil encourages companies to
served to consider Latin America as a potential business establish operations in the country by offering a

34
Another random document with
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 "Quite certain," was the mournful reply.

"Does Matteo know all?"

"He can hardly know it, or—or I should not have found
you here alone. But he will be sure to know it before the
morning; evil tidings fly on swift wings."

Horace grasped the hand of his friend with a convulsive

pressure. "Oh, Raphael, you will not—cannot see me
murdered in cold blood by that merciless man. For my
mother's sake—for God's sake—for the sake of Him whom
you serve—release me—save me from this horrible fate!"

The earnest, imploring gaze was met by one of anguish.

"We can fly together," continued Horace, speaking with

eager rapidity. "Once out of the forest we are both safe,
both happy—"

Raphael interrupted him with a single word, "Enrico!"

In that name were expressed all the difficulties of his

position, at least all such as might be regarded as
insuperable. The fearful choice to Raphael lay but between
his brother and his friend. To save the one was to sacrifice
the other.

It was a moment of exquisite pain to the captive and his

companion. So great was the tension of their nerves, that
the sound of a whistle from below made them both start, as
if it had been a death-signal.

"They come—all is lost!" exclaimed Horace.

"No—not so—there is but one man—it is only Marco,"

said Raphael, as the powerful form of the bandit appeared
advancing to the rock.

"But he knows all—I see it in his face; he comes a

death-messenger!" cried Horace.

And certainly the dark, saturnine countenance of the

robber wore a deeper shade of gloom than usual, such as
could not escape the notice of the anxious eyes that sought
to read in it their fate.

"He may know nothing, do not betray your own secret,"

whispered Raphael, who, however, could not but draw the
same conclusion as young Cleveland had done from the
bandit's appearance.

CHAPTER XV.
ONWARDS.

When Marco had reached the top of the parapet, Horace

drew a little hope from the trivial circumstance that the
bandit did not look at him, nor appear to notice his
presence. He addressed himself at once to the
improvisatore.

"Your preaching to the living is over, you may now pray

for the dead," he said in a hollow, sepulchral voice, crossing
himself as he spoke.

"Explain yourself!" exclaimed Raphael.

 "Your brother is—" Marco pointed downwards—"with the
souls in purgatory."

Raphael uttered an exclamation which was almost like a

cry. "Not by violence, not by violence?" he gasped forth.

Marco gloomily shook his head, and muttered between

his teeth, "The Cascata della Morte!"

"How did it happen?" exclaimed Horace, giving voice to

the question painted on Raphael's agonized face.

"We were all on our way to the high road," said Marco,
"when some one proposed that instead of following the
bend of the river, it would be well for one or two of our
party to cross it, so that by making a round to the left, we
might come on the travelers from behind, while the rest
attacked them in front. Enrico and I had orders to cross.

"You know," continued the robber, addressing himself to

Raphael, "that the only bridge there is, the trunk of the
tree, thrown across from bank to bank, some twenty yards
above the Cascata. Enrico went first, I lingered to tighten
my belt, which was loose. I know not whether he was taken
with giddiness at seeing the waters rushing on so madly
beneath him, or whether he stumbled on the rough bark,
but I saw Enrico suddenly go down splash into the current.
He gave a cry and struggled desperately, but the rush there
is so strong and rapid that no swimmer could stem it; the
water bore him on as if he had been a reed on the surface,
on—over—you know the depth of the fall, and may judge
whether he could reach the bottom alive."

Raphael closed his eyes, as if to shut out a vision of the

awful scene—the precipice and the victim dashed over it.
 "Not time for a single Ave or Paternoster," said the
bandit, "even had he had the grace to repeat one; but I
trow that you had made half a heretic of him. There was not
a saint who would help him in his need, or he would not
have come to so awful an end."

Raphael turned and rushed into the cave, to hide

himself from the sunshine, and give vent in solitude and
darkness to the first burst of uncontrollable grief.

"Ay, ay," said Marco, following him with his eyes; "if
ever one brother loved another, that brother was Raphael.
He is always teaching and preaching about submission, but
I take it that when it comes to a sharp, sudden trial like
this, the heretic's faith and trust will be whirled away, like
that poor struggling wretch who has just been dashed to
pieces over the fall. It was an awful sight, even to one used
like myself to rough work," added the bandit, wiping his
brow; "and often when I stand sentry within sound of that
deathly cataract, I shall fancy that I hear again the last cry
of the miserable Enrico."

"Is Matteo returning soon?" asked Horace, who could

not forget his own perilous position even in his interest in
the fate of the sufferer.

"He will come when he has done his business," was the
surly reply. "The sun has nearly sunk behind the hills, but
the expected party have not yet appeared. The band will
keep on the watch, and perhaps pass the night in the
woods. I am appointed sentinel at the rock-pass till they
return, and I have come to fill my wallet and my flask, as it
is uncertain how many hours I may have to remain and
keep guard."
 So saying, the robber went to the entrance to the cave,
pushed aside the plants which almost concealed it, and
stooping his tall, gaunt figure, entered in. Horace felt an
almost irresistible impulse to try once more the descent of
the rocks, impossible as he had found it to be to climb down
while the shackles confined his ankles. He was almost
bewildered by what he heard, evil tidings succeeding evil
tidings with a rapidity which had overpowered for a time the
stronger nature of Raphael, disciplined as it had been by
conflict and suffering.

Horace attempted to pray, but could not collect his

thoughts; only the only words of Scripture that came into
his mind were,—

"'Oh, that I had wings like dove!"

And that aspiration, the poor doomed captive uttered

from the depth of his soul.

In about a quarter of an hour Marco emerged from the

cave, and proceeded towards his allotted post. He stopped
as he was about to pass Horace, and looked at him with a
scrutinizing eye.

"One might deem that you had been the one to lose a
brother," he observed, "or that you had just seen the ghost
of Enrico. You look white as a corpse on the bier."

Horace made no answer, and the robber went on his

way.

Scarcely had Marco reached the wood, when Raphael

came forth from the cave. He was now perfectly calm, but
almost stern in his sadness, and Horace saw more distinctly
than he had ever seen it before, the Rossignol's likeness to
his brother. Raphael made a gesture to the prisoner to place
his foot upon a large stone which was near, and then, to the
surprise of Horace, threw himself on his knees beside him.

"When I besought God to make the path plain before

me, I thought not of this answer," said Raphael in a low
tone; "but just and true are his ways;" and the moment
after, with a file which he had brought in his hand, he was
working at the chain of the captive.

The mingled feelings of hope, fear, delight, impatience,

which struggled together in the bosom of Horace pass
description. Thought Raphael filed with the full power of his
right arm, it seemed to Horace as though the stubborn iron
would never give way, and the noise caused by the
instrument sounded to him so loud, that he was in terror
lest it should reach Marco, and awake his suspicions. At the
first pause made by Raphael, though it was but to shake
back the dark locks that had fallen over his brow as he
stooped, Horace caught the file from his hand and used it
himself with the desperate energy of one who felt that his
life might be the sacrifice of even a few minutes' delay; but
he found that better progress was made when he resigned
it again to Raphael.

Not a single word was uttered by either until the work

was completed, and Horace stood unfettered beneath the
deep blue sky, which was already darkening into night. He
would have leaped and bounded in the rapture of recovered
freedom, but for an instinctive delicacy which forbade
demonstration of joy in the presence of the bereaved
brother of Enrico.

"Now, put on my mantle and hat," said Raphael.

 "Why so?" asked Horace. "Surely we shall escape
together; I shall have your guidance through the forest?"

"Through the most intricate part you shall have it; but
when we reach the post guarded by Marco, we must
separate; it is only wrapt in disguise that you will be able to
pass him."

"He is but one man—there are two of us," began

Horace, all his natural courage rising at the prospect of a
struggle.

"One man—but with two pistols at his belt, and with a

hand that, when it draws a trigger, never fails to hit its
mark. Remember also that the sound of a shot would be
sufficient to draw the whole band upon us. Do not delay
putting on this disguise; time is precious to you now."

Horace promptly obeyed. Though he had not yet

attained the stature of Raphael, the difference between
their heights was not great enough to be striking, and the
almost sudden darkness of southern latitudes was now
falling upon earth.

"There is the moon," observed Horace; "her light will

serve to guide us on our way."

"I need it not," the Rossignol replied, "every step of that

way is familiar to me;" and he began descending the rocks.

Horace followed, rejoicing in his newly-restored powers

of activity, though their exercise was cramped not a little by
the necessity of moving with caution in the darkness. Before
he clambered over the rocky parapet, he turned one last
glance towards the old oak, the dim outline of whose
branches he faintly could trace.
 "Farewell," thought the released captive, "farewell for
ever to the place where I suffered so much of evil, and
learned so much of good; where I have seen more of the
wickedness of man, and more of the grace of God, in a few
days, than in all my former lifetime!"

In profound silence, save when a pebble fell, dislodged

beneath a climbing foot or hand, the twain descended those
rocks down which the prisoner had so often gazed,
measuring their depth with an anxious and at length a
hopeless eye. A few more steps, and the fugitives had
entered the depths of the forest. Here the light was almost
entirely shut out, for rarely was a glimpse of the silver
moon seen behind the thick branches. Over moss-grown
roots, between the knotted, gnarled trunks of old trees,
now bending low to avoid being struck by their boughs, now
thrusting aside plants whose long trailing tresses concealed
all trace of a path even during the day, Raphael guided his
companion.

Occasionally there was a rustle as they started some

wild creature from its lair, or a frightened bird rose on the
wing. A single nightingale was pouring forth its soft,
melancholy lay; other sounds there were none, till a faint
noise, as of a distant waterfall, reached the listening ear. A
sudden turn at length brought the fugitives to a break in the
forest, and Horace saw before him the same ledge of rock
overhanging a precipice which he so well recollected
traversing under the guidance of Enrico.

The moon, almost at the full, in unveiling brightness

shone on the cold gray stone, veined with green moss and
lichen, and the wooded heights which rose on one side
above it, and even revealed the awful beauty of the deep
gorge on the left, glimmering on a stream which, hundreds
of feet below, wound like a thread of silver through the dark
valley. Distinct in the moonshine, which threw his black
shadow on the rock wall behind him, rose the gaunt form of
Marco the bandit. He stood at so narrow a part of the ledge,
that though he was almost close to the rock, the precipice
in front of him yawned scarcely more than a yard from his
feet. He could hardly be passed without being touched, and
Horace perceived at once that, without the protection of a
disguise, the attempt to cross in front of the watchful
sentinel must bring inevitable destruction.

"Draw your hat lower over your brow," whispered

Raphael; "the pass-word is 'Speranza.' If Marco speak to
you, do not reply. Silence on my part would cause no
surprise after all that has passed. The sound of water will
be sufficient to guide you, till you reach the bank of the
stream. Do not attempt to cross it," Raphael's voice faltered
as he spoke, "turn to the right and follow its course till you
reach the high road, which crosses it by a bridge. And now
—God's blessing go with you!" and extending his hand to
Horace, Raphael added, "here we must part."

"O Raphael!" exclaimed the young Englishman, grasping

it with emotion, "I cannot desert you thus, I cannot leave
you to the vengeance of Matteo—I feel that your blood
would be on my head—I would rather go back to the cave!"

The two hands were yet clasped in each other, and

Horace felt the warm pressure of his friend's as he replied,
"You would have no chance of mercy; your young life would
be the certain sacrifice; I have a thousand advantages
which you do not possess. I know every man in the band—I
have put most of them under obligation; every path in the
forest is familiar to me as well by night as by day. If you
knew the mountain's weight which will be removed from my
heart by your flight, you would not dally thus with your
fate."
 "But do I not leave you to danger—the most terrible
danger?"

"You leave me to the care of my heavenly Father. He is

with me, I have nothing to fear."

"But," began Horace, still retaining his hold of the hand

of Raphael, "if you should suffer for this generous act, I
never should know peace any more."

"Say not so," murmured the Rossignol, with more than

his usual sweetness of tone; "if anything should happen to
me, think that the lone, desolate wanderer has found at last
rest and a home; that the dreary warfare is ended—the long
life-struggle over. I am not, as you are, a mother's hope,
and pride, and comfort; I now stand alone in the world."

"I will be your brother!" exclaimed Horace. "Oh, I

cannot, will not desert you!"

"You could not serve me, even were you to return to the
cave," said Raphael; "I could not replace the chains; the
Rubicon was passed when I filed them asunder. My chance
of escape would be greatly lessened by my having to care
for your safety as well as my own. Therefore go, my friend
—my brother!"

Raphael drew Horace to his heart, and pressed him to it

for a moment in a close embrace; then suddenly unloosing
it, he turned around and buried himself in the wood.

CHAPTER XVI.
 A PERILOUS PASS.

The parting from Raphael gave a keen pang to Horace.

He could scarcely have believed that in so short a space of
time, any human being could have obtained so strong a
hold upon his affections. Pity, gratitude, admiration had
combined in a three-fold cord to knit to his heart the man
whose fate had been so singularly linked with his own, and
who was now freely risking life to save him. But Horace had
no time to dwell on tender recollections at a moment like
this. The absorbing instinct of self-preservation claimed now
the first place in his mind. Every minute of delay increased
the danger of the dreaded Matteo's return. Horace must
pass along that perilous ledge, close in front of the ruffian
whose strong arm could, were his slightest suspicion
aroused, hurl the stripling over the beetling precipice to lie
a mangled corpse in the valley below.

"Speranza! Speranza! Hope!" Horace repeated to

himself, less from the fear that in the excitement of the
moment the pass-word might escape his memory, than
from an effort to draw encouragement from the sound.
"God be my helper! God be my hope!" And drawing
Raphael's mantle yet more closely round his form, and
pulling the hat lower over his eyes, with a palpitating heart,
yet a firm, brave step, Horace Cleveland strode forth into
the moonlight, which had never before appeared to him so
painfully brilliant.

"Ha, Raphael, you are not going thither! It is of no avail!

You will only turn your brain altogether!" exclaimed Marco,
as Horace approached him, and to the no small alarm of the
fugitive, the bandit actually laid a strong, heavy hand on his
shoulder.
 "Speranza!" muttered Horace, shaking himself loose
from a grasp which seemed to him like that of death. The
fugitive could scarcely believe the evidence of his own
senses when he found himself actually striding onwards
beyond the perilous spot. He expected every moment to be
overtaken by a bullet, or to hear a sudden shout of
recognition. He dared not look behind him, nor much
quicken his steps, but instinctively he held his breath till he
had gained the wood at the further end of the ledge. Then,
indeed a low, fervent thanksgiving burst from the lips of
Horace, and he felt himself really free.

The sound of falling water had every minute become

more and more distinct. Horace, with eager hope, hurried
forward in the direction from whence it came. Yet a little
struggling through bramble and bush, trying the most direct
way rather than the clearest, while still listening with painful
anxiety for sound of pursuit, and the youth reached the
bank of a stream which was rushing on as if eager to plunge
madly down into the valley. The trunk of a tree lay over it,
cutting with its dark, rough outline the path of quivering
silver which the moonbeams had thrown across the waters.
Here must have been the scene of the fearful catastrophe
which Marco had related.

Horace shuddered at the sight of those dark, rapid

waters in which a fellow-creature so lately had perished. He
had now, however, no time for reflecting on the untimely
fate of the wretched Enrico. Remembering the directions of
Raphael, Horace was about to track the upward course of
the stream, when he was startled by a faint cry, as of a
human voice, which mingled with the rushing noise of the
cataract. Horace was not of a superstitious nature; but it is
no marvel that, when his nerves were quivering from the
tension required for a great effort—at that hour of night—in
that desolate place—on the very spot where he believed
that, but a few hours before, a miserable man had been
swept into eternity— that cry should seem to curdle the
blood in his veins.

Again it rose, more distinct than before; and now

superstition—if such a feeling had for a moment arisen—
gave place to one more worthy. Horace was many yards
from the head of the cataract, though he could see its spray
white in the moonlight; the way to it was very thickly
overgrown with brushwood, through which mortal foot had
never yet made its way.

He held a short debate in his mind as to the course

which he ought to pursue; whether he should seek his own
safety by going to the right, or whether he should force a
difficult passage to the top of the fall, in hopes of giving aid
to some fellow-creature in distress. Was it not possible that
Enrico, saved by some incomprehensible miracle, might be
there in a position of peril from which he had no power to
extricate himself? Might not Horace give aid to the brother
of Raphael? That last thought destroyed every doubt, every
selfish calculation of personal risk. Horace only considered
how he might reach the place, and though not yet daring to
answer the cry, he began with all the activity and energy on
which he once had prided himself, to make his way to the
edge of the cascata.

When the English youth had accomplished his object,

how wondrous was the scene which presented itself to his
view as he bent forward to gaze down the cascade. The
body of water was not large, but the depth of the fall was
very great, and one sheet of white foam overspread the
stream which plunged seething, hissing, roaring—down—
down—down—till it was lost in the cloud of spray which,
hundreds of feet below, veiled the bottom of the cataract.
Exquisite was the beauty of the fall, especially as now seen
by the misty, silvery light of the moon, which gave a ghastly
grandeur to the wild, bold, wooded rocks, which the
cataract seemed to be cleaving asunder like an archangel's
glittering sword. But the eye of Horace was riveted on one
dark object in the midst of the foam, not many feet below
the summit. At the first glance, he deemed that it might be
a fragment of rock that had endured for ages the dash and
fret of the restless waters; but no; it moved—it clung—a
human being, suspended as it seemed by miracle, was
living—breathing in the very heart of the dizzying roar and
rush!

"How can I help you?" shouted out Horace, forgetful of

everything but the frightful situation of Enrico.

"A rope—quick—my strength is giving way!" Hollow and

strange came the scarcely articulate sounds.

Horace struck his brow with his hand. "What can I do?
Oh, what can I do? A rope were worth the ransom of a
king!"

"I can't hold out long; the rush will bear me down." The
voice was fainter than before.

Horace drew Raphael's mantle from his shoulders; he

tore from it strip after strip; he could think of no other
means of saving the perishing man. With fingers which
trembled with nervous haste, he proceeded to tie together
these unmanageable substitutes for a rope. Tightly, he
knotted them, and tried each knot; for the awful
consequences, were a single one to give way, were too
terrible to think of. His movements were quickened by the
horrible dread that he would see Enrico, exhausted and
despairing, whirled down to certain death at the very
moment when deliverance appeared at hand.
 "Haste, or I'm lost!" cried the voice from the fall.

Horace was engaged in fastening one end of his

improvised rope round a tree which bent over the cataract.
The stem was so slender that he almost feared lest its roots
should give way with the strain which would be upon it, but
there was no other tree sufficiently close to the edge to
serve his purpose.

"Now!" exclaimed Horace, as he flung the thick knotted

rope towards the spot where the indistinctly seen form of
Enrico broke the long line of foam.

At that moment a cloud passed over the moon, which

had till then been shining in untroubled brightness.

"Where is it? I can't find it!" cried Enrico, in a tone of

anguish.

Horace's interest rose to agony. He had done all that he

could do—he had strained every nerve—he had now nothing
left but the means of prayer. Fervently he prayed for light—
light on the fearful, the fatal darkness. Like a film the cloud
rolled away; he looked down—almost fearing to look—Enrico
was still clinging below.

"I see it, but I can't reach it!" shrieked the miserable
man; the dark line of the rope lay on the foam just beyond
his outstretched hand.

Horace was almost in despair; he had no power to

throw it nearer; the current of the waters was gradually
drawing the life-rope further away from their victim.

"Make a spring at it!" exclaimed Horace, and shuddered

at his own words, lest Enrico should obey, miss the rope,
and be dashed to pieces down the fall.
 "He has done it! Oh, merciful Heaven!" gasped the
youth, almost faint with extreme excitement. "Hold on, hold
on for your life!" And with a strength beyond his years—a
strength which seemed to be superhuman—Horace,
throwing his whole weight on the upper end of the rope,
drew it hand over hand towards him. He was in momentary
dread of feeling it suddenly become light from the yielding
of a knot, or from the numbed hands below giving up their
desperate grasp; he was not without an undefined sense of
terror lest he should be overbalanced himself, and instead
of saving Enrico, be dashed with him over the abyss. Not
even when Horace had passed Marco in safety had he
experienced a feeling of relief so intense as when Enrico's
dripping head appeared above the fall, and, a moment after,
with a tremendous effort, he swung himself on the bank.

"Thank God! Oh, thank God!" exclaimed Horace.

Enrico lay motionless, senseless. His failing powers had

been concentrated on that one effort, and he swooned as
soon as it had been made.

Horace did all that he could to fan the flickering spark of

life. He first dragged Enrico a few paces from the edge; for
in that moment of dizzy horror, he could not disconnect
nearness to the Cascata della Morte from the idea of
danger; he longed to get beyond hearing of its roar. He then
removed part of the clothes of the half-drowned man, which
were torn, saturated, and dripping with water. He chafed
Enrico's limbs, breathed on his lips, tried to impart warmth
to the bruised and benumbed frame. He wrung the water
from the long black hair which hung in tangled strands over
the ghastly face, which even in its senselessness retained a
look of distress which told of the agony of the late struggle
for life.
 While Horace is thus engaged, I will relate how Enrico
had come into the strange and fearful position from which
he had been thus wonderfully rescued.

Slipping on the rough tree-bridge and losing his

balance, Enrico had fallen into the stream, struggling in vain
with the current, and had been (as Marco had described),
borne onward to the edge of the cataract. In vain had he
attempted to catch at the reeds of grasses near, in vain he
had shrieked for help. He had been whirled on, and then
over in that awful plunge which involved almost inevitable
destruction!

From the centre of the rock wall that backed the

cataract, and not very far from the summit, jutted out small
fragment of crag, round and over which the furious waters
had for centuries dashed, bearing away articles of the solid
stone by ceaseless wear, yet leaving a tooth-like projection,
only visible when the flood was not full, though its
opposition always whirled the spray in wider circles from
that spot.

On this projection the unfortunate Enrico was dashed,

stunned, and bruised. Caught by his clothes, he had been
suspended for some minutes in an almost unconscious
state, unable even to utter a cry. He revived, indeed, but
only to become aware of the full horrors of his situation. His
eyes being, from his position, turned below, he beheld the
awful depth down which he expected every moment to be
hurled, as the fierce hissing waters, with unceasing flow,
seemed like merciless enemies determined to tear him
down, to wrench him away from the one little point of
refuge afforded by the projecting crag to which he now
wildly clung.
 Enrico's soul sickened, his brain reeled; the din of the
torrent rushing, rolling, roaring—above, below—almost
maddened the wretched man! A strange idea possessed his
mind, that it was Raphael's prayer which suspended him
now, as it were, by a hair above the gulf, of not only
temporal but eternal destruction. If Raphael should cease,
even for a moment, to pray, the half-frenzied Enrico
believed that the waters would have their wild will, and bear
him crashing down to perdition, swathed in the white
shroud of their foam!

Thus passed the fearful time till brief twilight deepened

into night. Still Enrico clung to his crag, its shape enabling
him so to support his person that its weight did not rest on
his hands, though all their strength was needed to enable
him to resist the constant pressure of the furious waters. He
was contending with a foe that could never grow weary.
Often Enrico cried aloud for help, with a bitter
consciousness of the improbability that such cry would
reach a human ear, since he had never yet known any one
come to the top of the cliff, less from the difficulty of
reaching it, than from a superstition which clothed the
Cascata della Morte with supernatural terrors. The forest
path, indeed, was not far distant, but it was lonely and wild,
and never trodden save by members of the band. It seemed
to Enrico as if the din which perpetually roared in his ears
completely drowned the sound of his voice. He could hardly
hear it himself; how could it reach a distant ear?

The robber had become calmer, though not less

wretched. His mind now reverted to the past. Each event of
his life—every error—every sin—seemed to rise up before
him distinct as the white spray in the moonlight, hissed in
his ears with the roar of the fall. Had not his position for
years been imaged by his position now? Carried away by his
passions as by the flood, hurled over the brink of crime in
full rapid career towards endless ruin, yet caught—
suspended—restrained—as it were, by the prayers,
entreaties, example, of one who remained amid the whirl,
the rack, and the rush, yet unshaken and firm as the crag.

In that hour of extremest peril, the sinner's cry arose to

his God. Raphael had spoken of mercy; might not that
mercy be extended even unto him, not perhaps to save him
from impending death, but from the more fearful death of
the soul? Words that his brother had read from the
Scriptures flashed back on the mind of Enrico:

"'He is able also to save them to the uttermost

that come unto God by Him.'"

The drowning soul clung to that truth, even as the

numbed hands clung to the rock. Enrico knew the utter
impossibility now of saving himself; he felt that he deserved
no mercy from an offended God; but there was One who
could save "to the uttermost," One who had died to save,
One who could draw him yet out of the horrible pit, and set
his feet on a rock, and order his goings.

While thus hanging, as it were, between earth and

heaven, Enrico heard the call of Horace. He doubted not for
a moment that the Almighty had sent his brother to his aid.
When the rope of knotted strips was thrown down the
cascade, it seemed to the poor penitent as an emblem of
heavenly hope. Then sudden darkness hid it from his view,
and in vain his hand groped in the chill waters to find it. The
gloom of despair seemed to settle on his soul. The cloud
rolled away, and the straining eyes of Enrico beheld the
rope once again. He sought to grasp it, and failed.
 Was it that mercy, even the mercy held out to all
contrite sinners, was not to be reached by him—that he who
for so long had tried the patience of a long-suffering God,
was to perish at last even in sight of the means of
salvation?

"Raphael is praying, and I will hope," thought the

struggling sufferer; and when Horace shouted down the
direction to spring. "Raphael bids me, I obey," was the
reflection which nerved him for the one desperate leap upon
which he staked his existence.

Even when the rope was grasped, so great was the

sufferer's exhaustion, so benumbed and stiffened were his
fingers by the drenching of the flood, that he could scarcely
retain his hold. Yet it was as though an angel whispered as
he was dragged upwards through the dash and the foam,
"Hold fast—hold fast the hope set before you!" It was not
merely the action of a drowning man grasping a cord, but of
a perishing soul clinging to its last hope of grace.

As soon as the fearful effort was crowned with success,

exhausted nature gave way. In a stupor which must have
had fatal consequences had it overwhelmed him two
minutes earlier, Enrico lay with his dripping head supported
on the knee of Horace Cleveland. The stupor continued for
some time. At length the pale lips parted and sounds came
forth. Horace bent down to listen, and caught the words,—

"Oh, Raphael, I knew it was your prayer!"

 Then the large black eyes suddenly opened. They rested
not on Horace, but looked wildly around, as if seeking some
other face; and half raising himself on his arm, Enrico
exclaimed:

"Where is he—where is my brother?"

Horace did not answer, for at that instant his attention

was arrested by the sound of a distant report. He sprang to
his feet—there came another—another—then the rattling
sound of a volley, all in the direction of the high road.

"Ha!" exclaimed Horace Cleveland, "The hunters lay in

wait for a deer, but they seem to have fallen in with a lion."

Then, for the first time, Enrico recognized his deliverer.

"The prisoner, and free!" he exclaimed in accents of alarm.

"Ay, free—free as the air, and not likely to be soon in

bondage again, if that sound of musketry, as I believe, tells
that soldiers are at hand."

Enrico struggled to his feet, passed his hand across his

brow, and listened with a look of bewilderment and fear.

"Enrico, you also are free—free from worse bondage

than mine. Remember that the robbers will deem your life
forfeited. Surrender yourself up to justice, and I pledge my
honor that every effort shall be made to secure your safety
and your pardon."

"Pardon!" Enrico repeated the word, clasped his hands

and looked upwards;—he was not thinking of the pardon of
man.
 CHAPTER XVII.
ONE EFFORT MORE.

We will now return to Raphael, who with keen and

breathless interest had watched from the shade of the
forest Horace's passage along the perilous ledge. When
Marco's hand had been laid on the shoulder of the youth,
the Rossignol could hardly refrain from springing forward to
the rescue, and scarcely had Horace himself experienced
greater satisfaction than did his friend when that startling
danger was past. When the fugitive had disappeared from
his view, Raphael, for the first time, appeared to have
leisure to think of himself. To aid in the escape of a prisoner
was, as he well knew, a crime to be atoned for only with
life. Raphael was young, and notwithstanding the recent
bereavement, which had been like the wrenching away of a
heart-string, life was to Raphael a precious thing, not to be
parted with lightly.

As he stood with folded arms under the of the waving

boughs, a sense of the loveliness of nature came on his
poet-soul with a soothing, softening power. He felt loath to
leave God's beautiful world. How divinely fair looked the
scene before him, beneath the silvery rays of the moon!
How wooingly breathed the night-breeze upon his feverish
brow! How sweet sounded the nightingale's song, warbled
soft through the stilly air! Hope, even earthly hope, was not
dead in that young bosom; there was still a desire for
human love and for human happiness there. Raphael
thought of Horace, blessed with friends, a mother, a home;
not, indeed, with envy, but with the instinctive yearning of a
tender and loving nature for the sympathy of human hearts,
of which he had known so little.

Thus the improvisatore had no intention of awaiting a

violent death with folded hands; he revolved all possible
means of escape. From Matteo's mercy he expected as little
as he would have done from that of a lioness whose cubs
had been slaughtered before her eyes. He must not await
the burst of frantic fury of a father bereaved of his son and
balked of his vengeance. Nor could Raphael count upon the
protection of any of the band, though he knew that on some
he had the claim of gratitude. No, he must rely upon the aid
of God and his own efforts alone.

Raphael resolved to wait just long enough to give

Horace a fair start, which might be essential to his safety,
and then to follow himself in the same track as that which
his friend had pursued. It was true that Marco must be
passed on the perilous rock—that the bandit had pistols in
his belt, and that his bullet always levelled his victim. But
Raphael deemed it possible that the man would be reluctant
to slay a comrade, alone and unarmed. Marco was savage,
ignorant, blinded by superstition, a fanatic who regarded
murder itself as a venial offence compared with heresy; but
he was not so utterly hardened and depraved as were
Matteo and Beppo. The fate of Enrico had seemed
somewhat to move even his rugged nature. At all events,
Raphael felt that of two dangers the lesser one was to be
chosen;—better to try the chance of passing Marco, than to
await the return of Matteo and his gang.

After recommending himself to the protection of his

heavenly Father, in submission to the divine will, whatever
that will might appoint, the young Italian quitted the
shrouding shade, and with a firm step advanced towards
the sentinel, whose eyes were at that moment, turned in an
opposite direction. Raphael had, as we have seen, divested
himself both of hat and mantle. His face was calm, but very
pale;—the expression that of a man who knows that he is
facing death, but who has nerved himself to face it without
flinching. The mass of rich dark hair thrown back from his
high, pale forehead, fell almost to his shoulders, damp with
the dews of night.

Marco was repeating an Ave for the soul of the

miserable Enrico, when, chancing to turn round, he
suddenly beheld the tall figure approaching him in the
moonlight, bareheaded, in its spirit-like stillness and
calmness, with the gaze of its large, thoughtful eyes riveted
on his own. It came along the path by which, not an hour
before, he believed that Raphael had passed. The Rossignol
marveled to see the fear which he was wrestling down in his
own heart suddenly transferred to the man before him.
Marco's eyes dilated, his lips parted, his very hair seemed
to rise from his head; he crossed himself with a trembling
hand, moved backwards step by step as Raphael Goldoni
drew nearer, but staring at him still, like the hare fascinated
by the gaze of the serpent. At last with a cry, "'E il suo
spirito!" ("It is his ghost!") The strong man actually turned
and fled, overpowered by superstitious terrors.

Then Raphael knew the cause of that before inexplicable

alarm which his presence had inspired, and with
thankfulness for the path thus cleared for him which he
could never have reckoned, came a bitter pang of
remembrance, as he thought on his brother, loved and lost!
There appeared to be as little cause to doubt the death of
Enrico as there would have been had he been dashed over
the Falls of Niagara; no human foresight could have
calculated upon the singular accident to which he owed his
almost miraculous preservation.

Scarcely had the Rossignol entered the wood on the

further side of the pass, with a feeling of deep melancholy
as he approached the scene of his brother's fall, when he
was startled, as Horace had been, by the sound of distant
firing. It was evident that Matteo and his ruffian band had
lighted on no despicable foe—that they were engaged in a
desperate struggle with those who would claim blood for
blood, and life for life.

Raphael and Horace little guessed that a timid delicate

woman, foiled in her efforts to save her son in one way, had
attempted another, with the energy given by desperation to
maternal love. There had been a carriage and a lady within
it; there had been postilions and outriders; the appearance
of the equipage had been such as to awake cupidity, but not
arouse alarm. But the banditti were soon to find out that
the hands which held bridles were such as had been
accustomed to grasp the sword. The luggage on the
carriage consisted of sabres and carbines; and the travelers
within it, save one, were soldiers chosen for courage and
strength. Gold had, indeed, been lavished with unsparing
hand by the almost despairing mother; and now,
notwithstanding constitutional nervousness and delicacy of
frame, Mrs. Cleveland risked her own life amidst clashing
steel and flying bullets in order to lure from their secret
fastness, and draw within reach of the arm of justice, those
who in perilous captivity held her only son!

What was the result of the conflict we shall hear in the

following chapter.
 CHAPTER XVIII.
VICTORY.

"Onward, onward! Now or never must we make a

struggle for freedom!" exclaimed Horace. "If your strength
fail you, Enrico, lean upon me. This is no time for giving
way to weariness; and as for hesitation and doubt—"

"The firing has ceased!" gasped Enrico. "We know not

who are the victors."

"The right has conquered, be sure of that!" cried

Horace, whose countenance, beaming with hope and
flushed with excitement, presented a strong contrast to that
of Enrico, livid even to ghastliness! The young bandit in his
dripping garments looked more like the corpse of a drowned
man than one through whose veins the warm blood of life
was coursing.

"Come on!" again exclaimed the impatient youth; and

almost dragging his companion forward, Horace hurried on
for a few paces, and suddenly confronted—Matteo!

Defeat, disaster, despair, were stamped on the dark

lineaments of the chieftain, distinct as the blood-marks on
face and hand. It was the wounded lion driven back into the
shelter of his native jungle, who hears behind him the bay
of the bloodhounds, the shout of the hunters on his track!
Matteo had seen all his followers, save Marco, slain or
taken, and then, not till then, had he dashed aside opposing
weapons and plunged into the depths of the thicket. He had
paused but once, and that was to reload a pistol, less to
provide for defence than to assure himself that he should
never fall alive into the hands of his foes.

Before this desperate man stood his prisoner, his Italian

companion at his side. No thought of apparitions roused in
Matteo superstitious dread; he doubted not that in mortal
flesh and blood, he beheld a traitor and an escaping
hostage, a hostage for the son of whose ignominious death
he on that very night had heard!

A fierce joy flashed in the blood-shot eyes of the bandit;

he had lost all beside, but a dying man's vengeance yet
might be his. Matteo leveled his pistol and fired; the report
rang sharp through the wood, a victim lay stretched on the
ground, but that victim was not Horace Cleveland. Raphael
had reached the spot at that crisis only in time to throw
himself in front of his friend, and receive in his own bosom
the bullet destined for another!

With a wild cry Enrico rushed forward and threw himself

on the ground by his brother. Absorbed by one
overpowering dread, the wretched young man was
unconscious of all that was passing around him; he heard
not, cared not for the desperate struggle of Matteo with the
soldiers, his wrestling for liberty and life as a wild beast
caught in the toils, nor knew that the struggle ended at last
in the capture of the chief.

Enrico heard not, cared not for the sobs of delight with
which a mother embraced a rescued son, nor knew the
deep sympathy with which both Mrs. Cleveland and Horace
now bent over Raphael. Had an earthquake shaken the
forest, Enrico would scarcely have felt it. His brother's head
was supported on his breast; the expression of the features
was serene and painless, the heavy eyelids closed, and the
long dark lashes resting on the colorless cheek.

"Raphael! My brother, look at me, speak to me! This is

not, it cannot be death! One word, if it be of reproach—one
look, were it even in anger! Tell me that I have not this
night been rescued from the jaws of death, that I have not
been saved from the whelming waters to be plunged in
darker depths of wretchedness!"

The young man sobbed aloud in the anguish of his soul.

His nerves had been completely unstrung by the events of
the last few hours; his mind was crushed by the
consciousness that it had been his guilt that had led to the
ruin of his brother.

"He bleeds but little; he may, he will revive!" exclaimed

Horace. "I will bring water!" And he hurried away towards
the stream. Briny drops were fast falling on the face of
Raphael, but they seemed to have no power to arouse him.

"O God, have mercy upon me! O God, spare my

brother; let him not perish through my sin! I will submit to
Thy will in all things—I will not murmur—I will not rebel—
only spare this one precious life!" It was the wrestling,
agonizing prayer bursting from a broken and contrite heart.

"See, his lips move!" exclaimed Horace, who had just

sprinkled water over the face of the dying man.

Faint sounds came forth, soft and melodious still, from

those tuneful lips so soon to be silenced in death; even
Enrico hushed his wild grief to listen. Low but distinct were
the words:

"Joy cometh—in the morning!—see—it is brightening in

the east—darkness is passing away—and for ever!"
 "Raphael, do you know me?" faltered Horace, as he
knelt beside the Rossignol, and pressed his icy hand in his
own.

Raphael did not answer the question; the spirit

fluttering on the confines of a world of light seemed already
to feel the eternal sunshine on its wings! The large dark
eyes slowly unclosed, but their gaze was fixed upwards, as
if they beheld the vision of glories hidden from mortal eyes.

"It is over," he murmured—"all is over—the struggle—

the battle is past! More than conqueror—through Him—only
through Him who loved me! Ah, Marino— thou art there to
welcome me, the palm in thy hand—the glory round thy
brow. I knew our parting would not be for long! See the
angel faces bending from the clouds—they are waiting there
to receive me—light is streaming from the golden gate. Oh,
stay me not—I must go!"

"He must not die and leave me!" gasped Enrico.

"Raphael, live, if it be but to guide me, to teach me how to
wrestle with my sins, to lead me, even me, to the Savior!"

Raphael turned his eyes upon his brother with a sudden

look of joyful recognition.

"Enrico, saved!" he exclaimed.

"Yes, saved from destruction of body and soul, saved to

be—"

"My joy and crown of rejoicing!" cried the dying man,

the radiance of unearthly rapture lighting up his fading
features. "Oh, my God, I thank thee—I bless Thee—Thou
hast given me my heart's desire—Thou hast heard my
prayer for my brother! Hark!" he exclaimed, suddenly. "Do
you not hear the shouts—the music—loud—louder! It is the
song of triumph. The angels are beckoning me upwards—
why cannot I rise and join them! He is there—my Leader—
my King! I have waited for Him—sought Him—I have found
Him! All the mists are dissolving—the clouds are melting
into light—the chain that bound me to the earth is loosening
—He holds out a crown—a crown of life—and I take it—to
cast at His feet."

Horace covered his eyes. The martyr-spirit had spread

its pinions and soared upwards, leaving a track of light
behind!

*******

A full pardon for Enrico was ere long procured from the
king of Naples. It was granted partly on account of the
services of his father, partly because of the earnest
pleadings of the Clevelands, who thus sought to repay some
portion of the deep debt which they owed his brother.

The death of Raphael Goldoni had effected more than

his life. His light, which for a brief space had shone on earth
to the glory of his heavenly Father, had not been
extinguished in darkness. Horace and Enrico had seen his
example casting a pure though feeble radiance in the deep
gloom of the robbers' cave; but it had a stronger, more
abiding influence upon them when they thought of him as
one of the starry host, raised to glitter for ever in the
cloudless heaven above! Raphael had longed to win souls to
Christ, and had sought them at the greatest personal risk,
in the darkest haunt of evil. For such is the crown reserved,
for such is the promise given.

"'They that be wise shall shine as the brightness

of the firmament; and they that turn many to